ts x Business Plan T Profit Saved mework 0 Exercise 19-10 Computing absorption c

Question

ts x Business Plan T Profit Saved mework 0 Exercise 19-10 Computing absorption costing income LO P3 A manufacturer reports the information below for three recent years. Year Variable costing income Beginning finished goods inventory (units) Ending finished goods inventory (units) Fixed manufacturing overhead per unit $117,500 $122,400 $125,200 950 1,050 $ 4.20 4.20 4.20 1,450 950 1,450 Compute income for each of the three years using absorption costing Year 1Year 2 Year 3 Absorption costing income ? prev

Explanation / Answer

Year 1

Variable Costing Income = 117,500

Add: Fixed Manufacturing Overhead deferred in inventory = 4.20 * 1,450 = 6,090

Absorption Costing Income = 123,590

Year 2

Variable Costing Income = 122,400

Less: Fixed Manufacturing Overhead released in inventory = 4.20 * 500 = 2,100

Absorption Costing Income = 120,300

Year 3

Variable Costing Income = 125,200

Add: Fixed Manufacturing Overhead deferred in inventory = 4.20 * 100 = 420

Absorption Costing Income = 125,620

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