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The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 1 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1 2 3 Difference in $ 10800 i 36000 operating income Costing system that has Variable Costing Absorption Costing Neither higher net income %24 %24

The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 1 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1 2 3 Difference in $ 10800 i 36000 operating income Costing system that has Variable Costing Absorption Costing Neither higher net income %24 %24

Managerial Accounting
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 analysis
Section: Chapter Questions
Problem 1E: At the end of the first year of operations, 21,500 units remained in the finished goods inventory....
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Please help me find the answer. I know it is not 36,000 and I know it is not 31,304. 

The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 1 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1 2 Difference in 10800 i 36000 $ operating income Costing system that has Variable Costing Absorption Costing Neither higher net income %24 %24 %24
Transcribed Image Text:The following table shows the inventory balances, in units, for years 1, 2, and 3. Total fixed manufacturing costs were $72,000 for each of the last five years. The units in Year 1 beginning inventory were based on production of 800 units. Year 1 2 Beginning inventory 120 400 Production 800 920 920 Sales (920) (520) (920) Ending inventory 400 400 For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the higher net income. Year 1 2 Difference in 10800 i 36000 $ operating income Costing system that has Variable Costing Absorption Costing Neither higher net income %24 %24 %24
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