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Pie
3 years ago
12

Kluber, Inc. had net income of $911,000 based on variable costing. Beginning and ending inventories were 56,100 units and 54,200

units, respectively. Assume the fixed overhead per unit was $1.80 for both the beginning and ending inventory. What is net income under absorption costing?
a. $811,730
b. $904,160
c. $1,010,270
d. $907,580
e. $911,000
Business
1 answer:
Orlov [11]3 years ago
7 0

Answer:

Net operating income (absorption)= $907,580

Explanation:

Giving the following information:

Fixed overhead per unit= $1.80

Net income= $911,000 (variable costing)

Beginning inventory= 56,100 units

Ending inventory= 54,200 units

<u>Under absorption costing, fixed manufacturing overhead is a product cost. </u>We need to incorporate into the cost of goods sold the fixed overhead from beginning inventory and deduct the fixed overhead allocated into ending inventory.

Net operating income= 911,000

Less:

Fixed overhead beginning inventory= (1.8*56,100)

Add:

Fixed overhead ending inventory= (1.8*54,200)

Net operating income (absorption)= $907,580

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So the total inventory cost = annual holding cost + annual ordering cost

                                            = 207.85 + 207.85

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