Question

In 20x6, Supra Ltd.’s net income computed using the variable costing method was $17166, and its net income computed using the absorption costing method was $22208. The company’s unit product cost was $6.94 under variable costing and $13.27 under absorption costing. The beginning inventory consisted of 3471 units.

What was the company’s ending inventory in units?

Select one:

a. 3471 units

b. 4268 units

c. 27013 units

d. 2674 units

Moody Manufacturing Inc. reported $66389 of operating income for the year by using variable costing. The following information also pertains to the current year:

	Beginning inventory	0
	Production	30339 units
	Sales	20296 units
	Variable manufacturing cost per unit	$13 per unit
	Fixed manufacturing overhead	$142077

What is the operating income (loss) under absorption costing?

Select one:

a. $19358

b. $113420

c. $66389

d. $136692

Answer 1

value of manufacturing overhead charged to beginning inventory		3471*6.33	21971.43
difference in operating profit of absorption costing and variable costing		22208-17166	5042
value of manufacturing overhead charged to year end inventory		21971.43-5042	16929.43
difference in per unit of cost of production in absorption costing and variable costing		13.27-6.94	6.33
Units in year end inventory		16929.43/6.33	2674
income statement under variable costing				income statement under variable costing
sales		472314		sales	20296*23.27		472314
less variable cost of goods sold	20296*13	263848		less cost of of goods sold			358879.7031
contribution		208466		opening stock		0
less fixed cost		142077		add cost of goods manufactured	30339*17.6829	536481.5031
net operating income		66389		less cost of goods in closing stock	(30330-20296)*17.7	177601.8
				net operating profit			113434.2969
selling price per unit	472314/20296	23.27
cost of production under absorption costing	13+(142077/30339)	17.68298