A company that produces a single product had a net operating income of $88,000 u
ID: 2475677 • Letter: A
Question
A company that produces a single product had a net operating income of $88,000 using variable costing and a net operating income of $121,390 using absorption costing. Total fixed manufacturing overhead was $57,630 and production was 11,300 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)
increased by 33,390 units
increased by 6,547 units
decreased by 33,390 units
decreased by 6,547 units
A company that produces a single product had a net operating income of $88,000 using variable costing and a net operating income of $121,390 using absorption costing. Total fixed manufacturing overhead was $57,630 and production was 11,300 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)
Explanation / Answer
Total Fixed Manufacturing Overhead 57,630 Yearly Production 11,300 Fixed Manufacturing Overhead /Unit=57630/11300= $ 5.10 Net operating Income by variable costing 88,000 Net operating Income by absorption costing 121,390 Additional Net Operating income in Absorption costing= 33,390 The additional net opearting income in absorption costing is due to the carry forward of Fixed Manufacturing Overheads in Closing Stocks Fixed manufacturing OH absorbed by Each unit= $ 5.10 So Increase in Closing Stock in Year end=33390/5.10= 6,547 units So the inventory level at the year end increased by= 6,547 units
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