73 The level of inventory of a manufactured product has increased by 7,847 units

ID: 2523327 • Letter: 7

Question

The level of inventory of a manufactured product has increased by 7,847 units during a period. The following data are also available:

What would be the effect on income from operations if variable costing is used rather than absorption costing?

a.$54,929 decrease

b.$78,470 decrease

c.$78,470 increase

d.$54,929 increase

72-

The level of inventory of a manufactured product has increased by 8,505 units during a period. The following data are also available:

What would be the effect on income from operations if absorption costing is used rather than variable costing?

a.$51,030 increase

b.$51,030 decrease

c.$93,555 decrease

d.$93,555 increase

Variable Fixed Unit manufacturing costs of the period $13 $7 Unit operating expenses of the period $2 $3

Answer: $54929 decrease

Working notes for the answer

Total cost if variable cost is used =13+2=15

Total cost if absorption cost is used =13+2+7=22

Effect on income

=22-15* 7847

=7*7847

=54929

A.$54,929 decrease

_________________________________________

Answer: .$51,030 increase

Working notes for the answer

Total cost if variable cost is used =14+4=18

Total cost if absorption cost is used =14+4+6=24

Effect on income

=24-18* 8505

=6*8505

=51030

a.$51,030 increase

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