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Variable and Absorption Costing Grant Company sells its product for $50 per unit. Variable manufacturing costs per unit are $30, and fixed manufacturing costs at the normal operating level of 18,000 units are $90,000. Variable selling expenses are $4 per unit sold. Fixed administrative expenses total $155,000. Grant had 7,000 units at a per-unit cost of $35 in beginning inventory in 2016. During 2016, the company produced 18,000 units and sold 20,000. Would net income for Grant Company in 2016 be higher if calculated using variable costing or using absorption costing? Calculate reported income using each method.

Variable and Absorption Costing Grant Company sells its product for $50 per unit. Variable manufacturing costs per unit are $30, and fixed manufacturing costs at the normal operating level of 18,000 units are $90,000. Variable selling expenses are $4 per unit sold. Fixed administrative expenses total $155,000. Grant had 7,000 units at a per-unit cost of $35 in beginning inventory in 2016. During 2016, the company produced 18,000 units and sold 20,000. Would net income for Grant Company in 2016 be higher if calculated using variable costing or using absorption costing? Calculate reported income using each method.

Principles of Cost Accounting
Principles of Cost Accounting
17th Edition
ISBN:9781305087408
Author:Edward J. Vanderbeck, Maria R. Mitchell
Publisher:Edward J. Vanderbeck, Maria R. Mitchell
Chapter10: Cost Analysis For Management Decision Making
Section: Chapter Questions
Problem 10P
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Variable and Absorption Costing Grant Company sells its product for $50 per unit. Variable manufacturing costs per unit are $30, and fixed manufacturing costs at the normal operating level of 18,000 units are $90,000. Variable selling expenses are $4 per unit sold. Fixed administrative expenses total $155,000. Grant had 7,000 units at a per-unit cost of $35 in beginning inventory in 2016. During 2016, the company produced 18,000 units and sold 20,000. Would net income for Grant Company in 2016 be higher if calculated using variable costing or using absorption costing? Calculate reported income using each method.

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