a single product company prepares income statements using both absorption and va

Question

a single product company prepares income statements using both absorption and variable costing. Manufacturing overhead cost applied per unit produced in Year 2 was the same as in Year 1. The Year 2 variable-costing statement reported a profit, whereas the Year 2 absorption costing statement reported a loss. A possible explanation for the difference in reported income is that the units produced in Year 2 were

a. Greater then units sold in year 2

b. fewer than the activity level used for allocating overhead to the roduct

c.. fewer than units sold in year 2

d. greater than the activity level used for allocating overhead to the product

Which of the following is correct?

Explanation / Answer

A possible explanation for the difference in reported income is that the units produced in Year 2 were :

c. fewer than units sold in year 2

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