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