Final answer:
The difference in absorption costing income between producing 8,000 units and producing 9,600 units lies in how the fixed manufacturing costs are allocated over the units produced. Fixed costs per unit decrease with more units produced, thereby affecting the overall absorption costing income.
Step-by-step explanation:
Absorption Costing Income Difference
When calculating the difference in absorption costing income between producing 8,000 units and 9,600 units, you need to understand how fixed costs are allocated in absorption costing. With the variable manufacturing costs at $175 per unit and fixed manufacturing costs at $96,000, the total cost for producing 8,000 units would be the sum of total variable costs (8,000 units × $175/unit) and total fixed costs ($96,000).
If the company were to produce 9,600 units instead, the variable cost will increase, but the fixed cost would remain the same, being spread across more units, lowering the cost per unit. To find the difference in income from operations between the two production plans, the fixed cost per unit must be calculated for both scenarios (e.g., $96,000 ÷ 8,000 units and $96,000 ÷ 9,600 units) and then multiplied by the number of units sold, which in this case is estimated to be 8,000 units for both plans. This difference will represent the change in absorption costing income.