Answer:
The variable costing method will provide a net income $190,000 higher than the absorption costing.
Explanation:
Giving the following information:
Beginning fixed manufacturing overhead in inventory $240,000
Fixed manufacturing overhead in production 900,000
Ending fixed manufacturing overhead in inventory 50,000
<u>The difference between the absorption costing and variable costing is the treatment of the fixed manufacturing costs.</u>
For absorption costing fixed manufacturing overhead is a product cost, therefore it is present in the ending inventory.
<u>Absorption costing:</u>
Fixed manufacturing cost= Beginning fixed manufacturing overhead + Fixed manufacturing overhead in production - Ending fixed manufacturing overhead in inventory
Fixed manufacturing cost= 240,000 + 900,000 - 50,000
Fixed manufacturing cost= $1,090,000
<u>Variable costing:</u>
Fixed manufacturing cost= $900,000
The variable costing method will provide a net income $190,000 higher than the absorption costing.