The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $63,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 900 units. Year 1 2 3 Beginning inventory 100 0 500 Production 900 1,000 1,000 Sales (1,000) (500) (1,000) Ending inventory 0 500 500 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 2 3 Difference in operating income $enter a dollar amount $enter a dollar amount $enter a dollar amount Costing system that has higher net income select a costing system select a costing system select a costing system
The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $63,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 900 units. Year 1 2 3 Beginning inventory 100 0 500 Production 900 1,000 1,000 Sales (1,000) (500) (1,000) Ending inventory 0 500 500 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 2 3 Difference in operating income $enter a dollar amount $enter a dollar amount $enter a dollar amount Costing system that has higher net income select a costing system select a costing system select a costing system
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed
|
Year
|
|||||||||
|---|---|---|---|---|---|---|---|---|---|
|
1
|
2
|
3
|
|||||||
|
Beginning inventory
|
100 | 0 | 500 | ||||||
|
Production
|
900 | 1,000 | 1,000 | ||||||
|
Sales
|
(1,000) | (500) | (1,000) | ||||||
|
Ending inventory
|
0 | 500 | 500 |
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
|
2
|
3
|
||||
|
Difference in operating income
|
$enter a dollar amount
|
$enter a dollar amount
|
$enter a dollar amount
|
|||
|
Costing system that has higher net income
|
select a costing system | select a costing system | select a costing system |
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