A company that produces a single product had a net operating income of $89,000 u

Question

A company that produces a single product had a net operating income of $89,000 using variable costing and a net operating income of $123,560 using absorption costing. Total fixed manufacturing overhead was $58,140 and production was 11,400 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: Multiple Choice increased by 34,560 units decreased by 34,560 units increased by 6,776 units decreased by 6,776 units

Explanation / Answer

Fixed manufacturing overhead per unit = 58140/11400= 5.1 Change in inventory =(123560-89000)/5.1= 6776 Inventory increased by 6776 units Option 3 is correct

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