Question

# Figure 8-7. Ramon Company reported the following units of production and sales for June and July:...

Figure 8-7.
Ramon Company reported the following units of production and sales for June and July:

 Units Month Produced Sold June 100,000 90,000 July 100,000 105,000

Income under absorption costing for June was \$40,000; income under variable costing for July was \$50,000. Fixed costs were \$600,000 for each month.

7. Refer to Figure 8-7. How much was income for July using absorption costing?

 a. \$50,000 b. \$20,000 c. \$80,000 d. \$40,000

8. Refer to Figure 8-7. How much was income for June using variable costing?

 a. \$40,000 b. \$20,000 c. \$(40,000) d. \$(20,000)

 1 Income for July using absorption costing Fixed cost 600000 Unit of production 100000 Per unit fix cost (fixed cost/normal production) 6 (600000/100000) Income under variable costing 50000 Less: fix expenses (5000*6) 30000 Income under absorption costing for july 20000 Answer: B. \$20000 2 Income for June using variable costing Per unit fix cost (fixed cost/normal production) 6 (600000/100000) Income under absorption costing 40000 Absorption costing is higher by (10000*6) 60000 Loss= 20000 Answer : D.\$(20000)

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