Question

Fixed manufacturing costs are $42 per unit, and variable manufacturing costs are $126 per unit. Production...

Fixed manufacturing costs are $42 per unit, and variable manufacturing costs are $126 per unit. Production was 89,000 units, while sales were 83,660 units.

b. Determine the difference in variable costing and absorption costing operating income.
$

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Answer #1

Answer: $224,280

Calculations:

Fixed manufacturing cost under absorption costing = $42 x 83,660 units = $3,513,720

Fixed manufacturing cost under variable costing = $42 x 89,000 units = $3,738,000

Difference in variable costing and absorption costing operating income = $3,513,720 - $3,738,000 = $224,280

Note: In absorption costing and variable costing only difference in fixed manufacturing cost. So, the difference in operating income is change in the fixed manufacturing costs.

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