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A manufacturer reports the information below for three recent years. Year 1 Year 2 Year 3 Variable costing income $ 132,500 $ 138,400 $ 137,700 Beginning finished goods inventory (units) 0 1,950 1,450 Ending finished goods inventory (units) 1,950 1,450 1,550 Fixed manufacturing overhead per unit $ 2.20 $ 2.20 $ 2.20 Compute income for each of the three years usin

User DrBwts
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1 Answer

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12 votes

Answer:

Year 1 Year 2 Year 3

Absorption costing income $136,790 $137,300 $137,920

Step-by-step explanation:

In the question, we are given the following:

Year 1 Year 2 Year 3

Variable costing income $132,500 $138,400 $137,700

Beginning finished

goods inventory (units) 0 1,950 1,450

Ending finished

goods inventory (units) 1,950 1,450 1,550

Fixed manufacturing

overhead per unit $2.20 $2.20 $2.20

Note: The full requirement of the question is as follows:

Compute income for each of the three years using Absorption costing income.

The following formula are used below:

Number of units sold = Beginning finished goods inventory (units) - Ending finished goods inventory (units)

Total fixed cost = Number of units sold * Fixed manufacturing overhead per unit

Absorption costing income = Variable costing income - Total fixed cost

Therefore, we have:

Year 1 Year 2 Year 3

Number of units sold -1,950 500 -100

Total fixed cost -$4,290 1,100 -$220

Variable costing income $132,500 $138,400 $137,700

Absorption costing income $136,790 $137,300 $137,920

User Peter Lind
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