The following information is given for a company for the year ended December 31: Beginning finished goods inventory in units 0 Units produced 4,800 Units sold 4,000 Sales$400,000 Materials cost$96,000 Variable conversion cost used$48,000 Fixed manufacturing cost$72,000 Indirect operating costs (fixed)$80,000 Required: Calculate the additional Operating Income which will be provided by using absorption costing method instead of variable costing method.

SOLUTION- Absorption costing: Absorption costing is also called traditional costing. This method of…

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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The following information is given for a company for the year ended December 31:


Beginning finished goods inventory in units		0
Units produced		4,800
Units sold		4,000
Sales	$	400,000
Materials cost	$	96,000
Variable conversion cost used	$	48,000
Fixed manufacturing cost	$	72,000
Indirect operating costs (fixed)	$	80,000

Required:

Calculate the additional Operating Income which will be provided by using absorption costing method instead of variable costing method.

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