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The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1 3 Difference in operating 10800 $ 36000 income Costing system that has higher net income Variable Costing Absorption Costing Neither

The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1 3 Difference in operating 10800 $ 36000 income Costing system that has higher net income Variable Costing Absorption Costing Neither

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter18: Pricing And Profitability Analysis
Section: Chapter Questions
Problem 28P: The following information pertains to Vladamir, Inc., for last year: There are no work-in-process...
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The answer is NOT 36,000 or 31,304. 

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The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1. 3 Difference in operating 10800 $ 36000 income Costing system that has higher net income Variable Costing Absorption Costing Neither
Transcribed Image Text:The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1. 3 Difference in operating 10800 $ 36000 income Costing system that has higher net income Variable Costing Absorption Costing Neither
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