How will absorption cost income differ from variable cost

Reference no: EM13522986

Heath Company
DATA SUMMARY
Units 2012 2013
Beginning Inventory 400 600
Price $ 90 $ 90
Sold 1000 1900
Actual Production 1200 1700
Budgeted Production 1500 1500
Unit Variable Costs
Manufacturing $ 30 $ 30
Selling and Administrative $ 5 $ 5
Fixed Costs
Manufacturing $ 30,000 $ 30,000
Selling and Administrative $ 10,000 $ 10,000
Ending Inventory 600 400
Gross Margin (GM) and contribution margin (CM) for 2013 will be respectively
A. GM: $60,500; CM: $64,500 B. GM: $64,500; CM: $60,500
C. GM: $76,000; CM: $104,500 D. GM: $80,000; CM: $104,500

Heath Company
DATA SUMMARY
Units 2012 2013
Beginning Inventory 400 600
Price $ 90 $ 90
Sold 1000 1900
Actual Production 1200 1700
Budgeted Production 1500 1500
Unit Variable Costs
Manufacturing $ 30 $ 30
Selling and Administrative $ 5 $ 5
Fixed Costs
Manufacturing $ 30,000 $ 30,000
Selling and Administrative $ 10,000 $ 10,000
Ending Inventory 600 400
The difference in operating income for 2012 between absorption and variable costing will be
A. $8,000 more under variable costing. B. $8,000 more under absorption costing.
C. $4,000 more under absorption costing. D. $4,000 more under variable costing.

Beginning inventory was 15,000 units and ending inventory was 10,000 units. The fixed manufacturing overhead was
$8 per unit. How will absorption cost net income differ from variable cost net income?
A. absorption cost net income will be $80,000 higher.
B. variable cost net income will be $80,000 higher.
C. absorption cost net income will be $40,000 higher.
D. variable cost net income will be $40,000 higher.

Reference no: EM13522986

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