Variable Costing—Sales Exceed Production The beginning inventory is 11,000 units. All of the units that were...
Variable Costing—Sales Exceed Production The beginning inventory is 11,000 units. All of the units that were manufactured during the period and 11,000 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $55 per unit, and variable manufacturing costs are $97 per unit. a. Determine whether variable costing operating income is less than or greater than absorption costing operating income. b. Determine the difference in variable costing and absorption costing operating income.
Homework Answers
Solurion a:
Variable costing operating income is greater than absorption costing operating income because sales exceed production and fixed manufacturing cost will be released from beginning inventory.
Solution b:
Difference in variable costing and absorption costing operating income = beginning inventory units *fixed manufacturing cost
= 11000*$55 = $605,000
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Variable Costing—Sales Exceed Production The beginning inventory
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