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24 August, 19:57

Bellue Inc. manufactures a single product. Variable costing net operating income was $115,600 last year and its inventory decreased by 2,300 units. Fixed manufacturing overhead cost was $4 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year

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  1. 24 August, 20:16
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    absorption costing net operating income = $106400

    Explanation:

    Manufacturing overhead in inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory

    Since the fixed overhead cost was $4 for both unit in beginning and in ending inventory

    $4 per unit * (-2,300) = - $9200

    Variable costing net operating income = $115600

    subtract fixed manufacturing overhead costs released from inventory

    (9200) from Variable costing net operating income

    Absorption costing net operating income = Variable costing net operating income - fixed manufacturing overhead costs released from inventory

    Absorption costing net operating income = 115600 - 9200 = $106400
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