Question

P=&takeAssignmentSessionLocator a&inprogress... * Homework, Chapter 21 eBook 14 Show Me How Calculator Print Item Variable Costing-Production Exceeds Sales Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $132 per unit. Production was 140,000 units, while sales were 133,000 units. a. Determine whether variable costing operating income is less than or greater than absorption costing operating income. Variable costing operating Income is less than absorption costing, b. Determine the difference in variable costing and absorption costing operating income. Peedas Check My Work a. Recall that when units manufactured exceed the units sold, the variable costing operating income will be less than it is for absorption costing. b. (Production units - Sales units) x fixed costs per unit difference between variable and absorption costs Previous Next Check My Work more Check My Work uses

Answer 1

Answer b: In variable cost operating income only variable cost has been taken into an account where as absorption cost operating income means fixed overhead cost has been taken into an account.

Difference between variable and absorption costs = (Production units - sales units)* fixed cost per unit = ( 1,40,000-1,33,000)×$44 = $3,08,000

So, the difference is $3,08,000 and it has been always note that when unit produced is more than unit sold than it resulted in variable operating income is less than absorption operating income.