In 20x6, Supra Ltd.’s net income computed using the variable costing method was $16633, and its...

In 20x6, Supra Ltd.’s net income computed using the variable costing method was $16633, and its net income computed using the absorption costing method was $24129. The company’s unit product cost was $7.19 under variable costing and $13.43 under absorption costing. The beginning inventory consisted of 3057 units.

What was the company’s ending inventory in units?

Select one:

a. 3057 units

b. 4258 units

c. 1856 units

d. 26572 units

Expert Solution

Working Notes:
	Calculation of Fixed overhead per unit
	Product Costing as per Absorption Costing	$ 13.43
	Less: Product Costing as per Variable Costing	$ 7.19
	Difference is Fixed Overhead cost per unit	$ 6.24

Solution:
	Ending inventory = (Difference in Profit in both Method + Difference due to Beginning Balance ) / Fixed Overhead cost per unit

	Profit As per Absorption Costing	$ 24,129
	Less: Profit as per Variable Costing	$ 16,633
	Difference in Net income	$ 7,496
	Add: Difference in Beginning inventory (3057 Units X $ 6.24)	$ 19,076
		$ 26,572
	Divide By	"/" By
	Fixed Overhead Cost per unit	$ 6.24
	Ending inventory in Units	4258	Units

	Answer = Option 2 = 4258 Units

ekkarill92 answered 3 years ago

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