Answer:
The correct answer is $95,400 lower than absorption costing.
Explanation:
According to the scenario, the given data are as follows:
Units manufactured = 33,100
Sold units = 27,800
So, Units in ending inventory can be calculated as follows:
Units in ending inventory = Units manufactured - Sold units
= 33,100 - 27,800 = 5,300 units
Now, Fixed manufacturing OH = $595,800
So, we can calculate the fixed manufacturing OH per unit by using following formula:
Fixed manufacturing OH per unit = $595,800 ÷ 33,100 = $18
So, Difference in net income for the year can be calculated as follows:
Net income difference = Fixed manufacturing OH per unit × Units in ending inventory
= $18 × 5,300 units = $95,400
Hence, The net income in variable costing is $95,400 which is lower than in absorption costing.
