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The level of inventory of a manufactured product has increased by 8,000 units during a period....

The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available: Variable Fixed Unit manufacturing costs of the period $24.00 $10.00 Unit operating expenses of the period 8.00 3.00 What would be the effect on income from operations if variable costing is used rather than absorption costing? a.$80,000 increase b.$104,000 increase c.$104,000 decrease d.$80,000 decrease

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Answer #1

Answer : $ 80,000 Increase

Units incresed in the period = 8,000

Differenc in operaitng income between the Absorption costing and Variabel costing

= Difference in Units * Fixed Manufacturing cost per Unit

= 8,000 *10 = 8,000

Since during the period inventory has been increase so abosoprtion costing operating income is 80,000 more than the Variable costing operating income\

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