Question

Jeter Corporation had net income of $222,000 based on variable costing. Beginning and ending inventories were 7,000 units and 12,000 units, respectively. Assume the fixed overhead per unit was $6 for both the beginning and ending inventory. What is net income under absorption costing?

Answer 1

$252,000

Step-by-step explanation:

The computation of the net income under absorption costing is shown below:

Net operating income under variable costing $222,000

Add: fixed manufacturing overhead cost {(12,000 units - 7,000 units) × $6} $30,000

Net operating income under absorption costing $252,000

We simply added the fixed manufacturing overhead to the Net operating income under variable costing so that the net operating income under absorption costing as it includes the fixed cost