Question

Bellue Incorporated manufactures a single product. Variable costing net operating income was $96,300 last year and its inventory decreased by 2,700 units. Fixed manufacturing overhead cost was $2 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year

Answer 1

$101,700

Step-by-step explanation:

The difference between Variable Costing Income and Absorption Costing Income is due to fixed costs that are deferred in Opening and Closing Inventory. So to calculate Absorption Costing Income we need to adjust

Variable Costing Income with the fixed cost in inventory through a reconciliation as follows :

Reconciliation of Variable Costing Income to Absorption Costing Income

Variable costing net operating income $96,300

Add Fixed cost in stock changes (2,700 x $2.00) $5,400

Absorption costing net operating income $101,700

Thus, the absorption costing net operating income last year is $101,700