Question

The level of inventory of a manufactured product has increased by 7,635 units during a period....

The level of inventory of a manufactured product has increased by 7,635 units during a period. The following data are also available:

Variable Fixed
Unit manufacturing costs of the period $11.00 $3.00
Unit operating expenses of the period 1.00 4.00

The effect on operating income if variable costing is used rather than absorption costing would be a(n)

a.$22,905 increase

b.$53,445 increase

c.$22,905 decrease

d.$53,445 decrease

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Answer #1

Decrease in net operating income

= Increase in inventory * Unit fixed manufacturing cost

= 7635 * 3

= 22905 decrease

Option C is the answer

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