73
The level of inventory of a manufactured product has increased by 7,847 units during a period. The following data are also available:
Variable | Fixed | |
Unit manufacturing costs of the period | $13 | $7 |
Unit operating expenses of the period | $2 | $3 |
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:
Variable | Fixed | |
Unit manufacturing costs of the period | $14 | $6 |
Unit operating expenses of the period | $4 | $5 |
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
1
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
_________________________________________
2
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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