Question

g Assume absorption costing net income is $42000, ending inventory consists of 1100 units, the variable overhead rate is $12 per unit, and the fixed overhead rate is $14 per unit. Determine the net income under variable costing.

Answer 1

$26,600

Step-by-step explanation:

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

Net income under absorption costing $42,000

Less:

Fixed overhead cost (1,100 units × $14) -$15,400

Net income under variable costing $26,600

We simply deduct the fixed overhead cost from the absorption costing as the variable costing do not include any fixed overhead cost so the same is to be deducted