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Simora [160]
3 years ago
6

A company had net income of $50,000 under variable costing. Beginning and ending inventories were 400 units and 500 units, respe

ctively. Fixed overhead per unit was $10 for beginning inventory and $12 for ending inventory. Convert net income under variable costing to net income under absorption costing. What is net income under absorption costing?
Business
1 answer:
AleksAgata [21]3 years ago
7 0

Answer:

$52,000

Explanation:

Net income under variable costing considers only variable cost, while net income under absorption costing considers both variable and fixed cost. Therefore, we have:

Total beginning fixed overhead = 400 × $10 = $4,000

Total ending fixed overhead = 500 × $12 =$6,000

Fixed overhead for the period = $6,000 - $4,000 = $2,000

Net income under absorption costing = $50,000 + $2,000 = $52,000

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