Question

Feldspar, Inc. started the year with 200 units in the Finished Goods Inventory account. It produced 600 units during the year and sold 800 units. If Feldspar uses variable​ costing, ________. A. its operating income for the period will be higher than under absorption costing B. its value of ending Finished Goods Inventory reported in the balance sheet will be higher than under absorption costing C. its operating income for the period will be lower than under absorption costing D. its operating income will be the same as under absorption costing

Answer 1

Answer:

A. its operating income for the period will be higher than under absorption costing

Explanation:

As we know that

Under absorption costing, the fixed cost is divided on the number of units produced

And under the variable costing, the fixed cost is considered as a cost selling of goods so the absorption costing method will be lower than the value of finished goods.

As per the question, the started finished goods will help and sell the whole production and starting balance that means under absorption costing of goods which is to be sold is much than variable costing.