Homework Answers
Solution:-
a) Cost of ending finished goods inventory under absorption costing:
Operating income under variable costing = 1600000
Add Finished goods inventory higher in absorption costing = 50000
Less Operating income under absorption costing = (1200000)
Cost of ending finished goods inventory under absorption costing 450000
b)
Operating income under variable costing is 1600000
Operating income under absorption costing is 1200000
* Operating income under variable costing is higher than to under absorption cost.
* Difference between fixed manufacturing overhead released from begining inventory and fixed overhed deferring in ending inventory is the operating income difference 400000.
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