Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Units in beginning inventory 0 Units produced 10,000 Units sold 9,000 Direct materials $ 40,000 Direct labor $ 20,000 Variable manufacturing overhead $ 12,000 Fixed manufacturing overhead $ 25,000 Variable selling and administrative expenses $ 4,500 Fixed selling and administrative expenses $ 30,000 Assume that direct labor is a variable cost. Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount? Absorption costing net operating income would be higher than variable costing net operating income by $2,500. Absorption costing net operating income would be higher than variable costing net operating income by $5,500. Variable costing net operating income would be higher than absorption costing net operating income by $5,500. Variable costing net operating income would be higher than absorption costing net operating income by $2,500.
Kern Corporation produces a single product. Selected information concerning the operations of the company follow: Units in beginning inventory 0 Units produced 10,000 Units sold 9,000 Direct materials $ 40,000 Direct labor $ 20,000 Variable manufacturing overhead $ 12,000 Fixed manufacturing overhead $ 25,000 Variable selling and administrative expenses $ 4,500 Fixed selling and administrative expenses $ 30,000 Assume that direct labor is a variable cost. Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount? Absorption costing net operating income would be higher than variable costing net operating income by $2,500. Absorption costing net operating income would be higher than variable costing net operating income by $5,500. Variable costing net operating income would be higher than absorption costing net operating income by $5,500. Variable costing net operating income would be higher than absorption costing net operating income by $2,500.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter7: Variable Costing For Management
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Kern Corporation produces a single product. Selected information concerning the operations of the company follow:
Assume that direct labor is a variable cost.
Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?
| Units in beginning inventory | 0 |
| Units produced | 10,000 |
| Units sold | 9,000 |
| Direct materials | $ | 40,000 |
| Direct labor | $ | 20,000 |
| Variable manufacturing overhead | $ | 12,000 |
| Fixed manufacturing overhead | $ | 25,000 |
| Variable selling and administrative expenses | $ | 4,500 |
| Fixed selling and administrative expenses | $ | 30,000 |
Assume that direct labor is a variable cost.
Which costing method, absorption or variable costing, would show a higher operating income for the year and by what amount?
|
Absorption costing net operating income would be higher than variable costing net operating income by $2,500.
|
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|
Absorption costing net operating income would be higher than variable costing net operating income by $5,500.
|
||
|
Variable costing net operating income would be higher than absorption costing net operating income by $5,500.
|
||
|
Variable costing net operating income would be higher than absorption costing net operating income by $2,500.
|
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