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VLD [36.1K]
3 years ago
6

Last year, Tinklenberg Corporation's variable costing net operating income was $52,400 and its inventory decreased by 1,400 unit

s. Fixed manufacturing overhead cost was $8 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year?
Business
2 answers:
Cloud [144]3 years ago
3 0

Answer:

the absorption costing net operating income last year is  $41,200

Explanation:

Absorption Costing Net Operating Income for last year is determined by reconciling the Variable Costing Income to Absorption Costing Income.

<u>Calculation of Absorption Costing Net Operating Income</u>

Variable Costing Income                                             $52,400

<em>Less</em> Decrease in Inventory ( 1,400 × $8)                   ($11,200)  

Absorption Costing Net Operating Income               $41,200

Absorption Costing Net Operating Income will be <em>lower than </em>Variable Costing Income.

11Alexandr11 [23.1K]3 years ago
3 0

Answer:

<em>Net operating income  under absorption costing</em><em> = $41,300</em>

Explanation:

<em>The difference between variable costing and profit under absorption costing is simply the value of the change in inventory.</em>

<em>Usually, a decrease in inventory would cause profit under absorption costing to be lower . This is so because cost of goods sold would become higher leading to a lower profit</em>

Difference in profit = POAR × change inventory

                               =$8 × 1,400 = $11,200

Absorption costing profit = Variable costing profit - Difference in profit

               =$52,400 - $11,200

              = $41,300

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