Question

A company that produces a single product had a net operating income of $91,000 using variable costing and a net operating income of $127,960 using absorption costing. Total fixed manufacturing overhead was $59,160 and production was 11,600 units. This year was the first year of operations. Between the beginning and the end of the year, the inventory level:

Answer 1

$7,247.05

Step-by-step explanation:

The computation of the inventory level is shown below:

But before that first we have to find out the fixed cost per unit which is

= Total fixed manufacturing overhead ÷ production units

= $59,160 ÷ 11,600 units

= $5.1 per unit

Now the inventory level is by taking the difference of net operating income between two methods

= ($127,960 - $91,000) ÷ ($5.1 per unit)

= $7,247.05

Therefore, the inventory is increased by $7,247.05