Diego Company manufactures one product that is sold for $70 per unit in two geog

Question

Diego Company manufactures one product that is sold for $70 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 53,000 units and sold 48,000 units Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead 21 10 Variable selling and administrative Fixed costs per year: $1,060,000 Fixed manufacturing overhead Fixed selling and administrative expense 557,000 The company sold 36,000 units in the East region and 12,000 units in the West region. It determined that $270,000 of its fixed selling and administrative expense is traceable to the West region, $220,000 is traceable to the East region, and the remaining $67,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 7. What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)? Difference of Variable Costing and Absorption Costing Net Operating Income (Losses) Variable costing net operating income (loss) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing Absorption costing net operating income (loss) 33,000

Explanation / Answer

Variable costing net operating income -33000 Add: Fixed manufacturing overhead deferred in 100000 =1060000/53000*5000 Absorption costing net operating income 67000

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