Stiller Corporation incurred fixed manufacturing costs of $ 28 comma 000 during

Question

Stiller Corporation incurred fixed manufacturing costs of $ 28 comma 000 during 2015. Other information for 2015 includes: The budgeted denominator level is 2 comma 800 units. Units produced total 1 comma 500 units. Units sold total 1 comma 200 units. Beginning inventory was zero. The company uses absorption costing and the fixed manufacturing cost rate is based on the budgeted denominator level. Manufacturing variances are closed to cost of goods sold. Operating income using absorption costing will be ________ than operating income if using variable costing.

A. $ 3 comma 000 higher

B. $ 12 comma 000 lower

C. $ 5 comma 600 lower

D. $ 16 comma 000 higher

Explanation / Answer

A. $ 3 comma 000 higher Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up   Statementshowing Computations Paticulars Amount fixed manufacturing cost rate = 28,000/2,800                        10.00 No of units produced                  1,500.00 No of units sold                  1,200.00 It means 300(1500 - 1200) units are in ending inventory Fixed costs in ending inventory = 300 * 10                  3,000.00 Operating income using absorption costing will be 3,000 higher than operating income if using variable costing This is because in variable costing all Fixed cost of 15000(1500*10) will be charged in current year and nothing is carried in ending inventory However as per absorption costing 3000(300*10) will be in enidng inventory and 12000(1200*10) will be charged as expense

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.