Question

Caspian Company produced 19,600 units and sold 18,390 during the current year. Under absorption costing, net...

Caspian Company produced 19,600 units and sold 18,390 during the current year. Under absorption costing, net income was $24,100. Fixed overhead was $150,920.

Determine the net income under variable costing.

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Answer #1
Overhead rate per unit under absorption costing = Fixed cost / units produced
=$150920/19600
=$7.7
Overhead charged = Units sold * overhead rate
=18390*7.7
=18390*7.7
=141603
Net Income as per variable costing = net income as per absoption costing + overhead as per absoption costing - overhead for the period
=$24100+141603-150920
=$14783
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