Question

Variable Costing—Production Exceeds Sales Fixed manufacturing costs are $44 per unit, and variable manufacturing costs are $100 per unit. Production was 67,200 units, while sales were 50,400 units.
a. Determine whether variable costing income from operations is less than or greater than absorption costing income from operations. Variable costing income from operations is less than absorption costing.
b. Determine the difference in variable costing and absorption costing income from operations. $

Answer 1

Answer:

Instructions are lsited below.

Explanation:

Giving the following information:

Fixed manufacturing costs are $44 per unit

Variable manufacturing costs are $100 per unit.

Production was 67,200 units, while sales were 50,400 units.

First, we need to calculate the total cost of production under each method.

Variable:

Unitary cost= variable manufacturing cost

Unitary cost= 100

Total cost= cost of goods sold + fixed manufacturing costs

Total cost= 5,040,000 + (100*67,200)= $11,760,000

Absorption:

Unitary cost= variable manufacturing cost + fixed manufacturing cost

Unitary cost= 100 + 44= 144

Total cost= cost of goods sold

Cost of goods sold= 144*50,400= $7,257,600