Question

Front Company had net income of $73,500 based on variable costing. Beginning and ending inventories were 900 units and 1,400 units, respectively. Assume the fixed overhead per unit was $7.95 for both the beginning and ending inventory. What is net income under absorption costing

Answer 1

$77,475

Step-by-step explanation:

Calculation to determine net income under absorption costing

Using this formula

Net income=Net income+(Ending inventories×fixed overhead per unit)- (Beginning Inventories × Fixed overhead per unit)

Let plug in the formula

Net income=$73,500 + (1,400 units x $7.95) - (900 x $7.95)

Net income=$73,500+$11,130-$7,155

Net income=$77,475

Therefore net income under absorption costing is $77,475