A company that produces a single product had a net operating income of $85,000 u

Question

A company that produces a single product had a net operating income of $85,000 using variable costing and a net operating income of $115,000 using absorption costing. Total fixed manufacturing overhead was $56,100 and production was 11,000 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)

increased by 5,882 units

decreased by 30,000 units

decreased by 5,882 units

increased by 30,000 units

A company that produces a single product had a net operating income of $85,000 using variable costing and a net operating income of $115,000 using absorption costing. Total fixed manufacturing overhead was $56,100 and production was 11,000 units both this year and last year. Last year was the first year of operations. Between the beginning and the end of the year, the inventory level: (Do not round intermediate computation and round your final answer to nearest whole number.)

Explanation / Answer

increased by 5,882 units Statement showing computations Particulars Amount Net Operating income using Variable costing                85,000.00 Net Operating income using Absorption costing             115,000.00 Difference in income                30,000.00 Fixed Manufacturing Overhead                56,100.00 Production in units                11,000.00 Fixed Costs per unit                          5.10 No of Units = 30,000 / 5.10                        5,882 Since Net operating income as per absorption costing is more then it means more fixed costs are carried in ending inventory which in turn means more units in ending inventory

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.