A company that produces a single product had a net operating income of $79,000 u

Question

A company that produces a single product had a net operating income of $79,000 using variable costing and a net operating income of $102,760 using absorption costing. Total fixed manufacturing overhead was $53,040 and production was 10,400 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.) decreased by 23,760 units increased by 4.659 units decreased by 4,659 units increased by 23.760 units

Explanation / Answer

Total fixed manufacturing overheads = $53,040

Number of units produced = 10,400 units

Manufacturing overheads per unit = $53,040 / 10,400 = $5.1 per unit

Difference between operating income using absorption costing and variable costing = $102,760 - $79,000 = $23,760

Number of units increased in inventory = $23,760 / 5.1 = 4,659 units

As net operating income of absoprtion costing is more than variable costing that means the number of units in the inventory has increased

So the correct option is B increase by 4,659 units

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