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Vlad1618 [11]
3 years ago
14

Direct materials, $7 per unit, Direct labor, $5 per unit, Variable overhead, $6 per unit, and Fixed overhead, $270,000. The comp

any produced 27,000 units, and sold 18,500 units, leaving 8,500 units in inventory at year-end. Income calculated under variable costing is determined to be $355,000. How much income is reported under absorption costing
Business
2 answers:
Arte-miy333 [17]3 years ago
7 0

Answer:

Income reported under absorption costing =$440,000

Explanation:

<em>The income reported under absorption costing can be determined by  adjusting the income under variable costing for difference in profit.</em>

<em>The steps are outlined below:</em>

<em>Step 1</em>

<em>Calculate the Overhead absorption rate</em>

OAR = Budgeted Fixed overhead/ Budgeted number of units

=  $270,000/ 27,000 units

= $10

<em>Step 2</em>

<em>Calculate the change in inventory </em>

8500 units (given)

<em>Step 3</em>

<em>Calculate the difference in profit </em>=

<em> Difference in profit = OAR × change in inventory</em>

=8500×$10

= $85000

<em>Step 4</em>

<em>Calculate Income under absorption costing</em>

<em> =  Income under variable costing +  Difference in profit</em>

=$85,000 + $355,000

=$440,000

Income reported under absorption costing =$440,000

Rudik [331]3 years ago
6 0

Answer:

$440,000

Step by Step Explanation:

Therefore:

Fixed overhead/company produced unit

 $270,000/ 27,000 units = $10

8500×$10= $85000

=$85,000 + $355,000

=$440,000

Hence; the Income reported under absorption costing is =$440,000

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