Manta Ray Company manufactures diving masks with a variable cost of $27. The masks sell for...
Manta Ray Company manufactures diving masks with a variable cost of $27. The masks sell for $36. Budgeted fixed manufacturing overhead for the most recent year was $783,200. Actual production was equal to planned production.
Required:
State whether operating income is higher under variable or absorption costing and the amount of the difference in reported operating income under the two methods. Treat each condition as an independent case. (Do not round intermediate calculations.)
| 1. | Production | 97,900 | units |
| Sales | 95,600 | units | |
| 2. | Production | 88,000 | units |
| Sales | 94,900 | units | |
| 3. | Production | 82,600 | units |
| Sales | 82,600 | units | |
Homework Answers
Analysis
| Case | Product Units | Sales units | Method | Amount |
| 1 | 97900 | 95600 | Absorption | 783200/97900*2300 = 18400 |
| 2 | 88000 | 94900 | Variable | 783200/88000*6900 = 61410 |
| 3 | 82600 | 82600 | Same | 0 |
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