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During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials,...

During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $6 per unit, Direct labor, $3 per unit, Variable overhead, $5 per unit, and Fixed overhead, $296,000. The company produced 37,000 units, and sold 29,000 units, leaving 8,000 units in inventory at year-end. Income calculated under variable costing is determined to be $405,000. How much income is reported under absorption costing?

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Answer #1
Calculation of Income under absorption costing:
Income under variable costing                405,000
Add: Deferment of fixed overhead allocated to ending inventory                  64,000 (296000/37000*(37000-29000))
Income under Absorption costing                469,000
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