Question

Required information The following information applies to the questions displayed below.) Diego Company manufactures one product that is sold for $73 per unit. The following information pertains to the company's first year of operations in which it produced 44,000 units and sold 39,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labour Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses $748,000 $400,000 7. What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)? Difference of Variable Costing and Absorption Costing Net Operating Incomes Variable costing net operating income (loss) 56,000 Absorption costing not operating income (loss)

Answer 1

7
Variable costing net operating income(loss)	(56000)
Add: Fixed manufacturing overhead deferred in inventory under absorption costing	85000
Absorption costing net operating income(loss)	29000
Workings:
Selling price per unit	73
Less: Variable expense
Direct materials	23
Direct labor	16
Variable manufacturing overhead	2
Variable selling and administrative	4
Total Variable expense	45
Contribution margin per unit	28
Total contribution margin	1092000	=39000*28
Less: Fixed expenses	1148000	=748000+400000
Variable costing net operating income(loss)	(56000)
Fixed manufacturing overhead per unit	17	=748000/44000
X Change in inventory units	5000	=44000-39000
Fixed manufacturing overhead deferred in inventory under absorption costing	85000