Question

Rugrat Company has the following information for the current year: Beginning fixed manufacturing overhead in inventory $190,000 Fixed manufacturing overhead in production 750,000 Ending fixed manufacturing overhead in inventory 50,000 Beginning variable manufacturing overhead in inventory $20,000 Variable manufacturing overhead in production 100,000 Ending variable manufacturing overhead in inventory 30,000 What is the difference between operating incomes under absorption costing and variable costing?

Answer 1

$140,000

Step-by-step explanation:

The difference between operating incomes under absorption costing and variable costing based on fixed expenses is shown below:

Variable costing:

Fixed manufacturing overhead in production $750,000

Absorption costing:

The Fixed cost would be

= Beginning fixed manufacturing overhead in inventory + Fixed manufacturing overhead in production - Ending fixed manufacturing overhead in inventory

= $190,000 + $750,000 - $50,000

= $890,000

So, the difference would be

= $890,000 - $750,000

= $140,000