Question

A manufacturer reports the information below for three recent years. Year 1 Year 2 Year 3 Variable costing income $ 116,000 $ 120,800 $ 123,950 Beginning finished goods inventory (units) 0 1,400 900 Ending finished goods inventory (units) 1,400 900 1,000 Fixed manufacturing overhead per unit $ 4.40 $ 4.40 $ 4.40 Compute income for each of the three years using absorption costing.

Answer 1

Answer:

Absorption costing income

Year 1:  $122,160

Year 2: $118,600

Year 3: $124,390

Explanation:

As per given data

_________________________________ Year 1 ___ Year 2 ___Year 3

Variable costing income ____________ $116,000 __ $120,800 __$123,950

Beginning finished goods inventory (units) 0 _______ 1,400 _____ 900

Ending finished goods inventory (units) __ 1,400 ____ 900 ______ 1,000

Fixed manufacturing overhead per unit __ $4.40 ____ $4.40 ____ $4.40

Absorption costing income

_________________________________ Year 1 ___ Year 2 ___Year 3

Variable costing income ____________ $116,000 _ $120,800 __$123,950

Fixed OH in Beginning finished goods _  ($0) _____ ($6,160) ___ ($3,960)

Fixed OH in Ending finished goods ____ $6160 ___ $3,960 ___ $4,400

Absorption costing income __________ $122,160 _ $118,600 __ $124,390