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Dalton Corporation has fixed manufacturing cost of $10 per unit. Consider the three independent cases that...

Dalton Corporation has fixed manufacturing cost of $10 per unit. Consider the three independent cases that follow.

Case A: Absorption- and variable costing income each totaled $260,000 in a period when the firm produced 18,000 units.

Case B: Absorption-costing income totaled $340,000 in a period when finished-goods inventory levels rose by 9,000 units.

Case C: Absorption-costing income and variable-costing income respectively totaled $240,000 and $290,000 in a period when the beginning finished-goods inventory was 18,000 units.

Required:

A. In Case A, how many units were sold during the period?

B. In Case B, how much income would Dalton report under variable costing?

C. In Case C, how many units were in the ending finished-goods inventory?

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Answer #1

Case A : When absorption Costing and variable costing net income is equal then unit produced and sold will also be equal

So Units sold = 18000 Units

Case B = When Finished goods inventory level rose by 9000 Units it means variable costing net income is less than absorption Costing net income

So Net income under variable costing = 340000-(9000*10) = 250000

Case C = Difference in net income = 290000-240000 = 50000

Difference in inventory = 50000/10 = 5000 Units

Ending finished goods inventory = 18000-5000 = 13000 Units

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