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Bellue Incorporated manufactures a single product. Variable costing net operating income was $84,700 last year and its inventory decreased by 2,700 units. Fixed manufacturing overhead cost was $3 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year?
A) $8,100
B) $76,600
C) $84,700
D) $87,400
Variable Costing
An accounting method that includes only variable production costs in the cost of goods sold, excluding fixed factory overhead.
Absorption Costing
An accounting method that assigns all manufacturing costs, including both fixed and variable, to products, fully capturing the cost of production.
Fixed Manufacturing Overhead
Regular, unchanged costs incurred during the manufacturing process, regardless of the level of output.
- Cultivate an appreciation for the distinctions between absorption costing and variable costing and their ramifications on net operating income.
- Gauge the net operating income by applying absorption and variable costing techniques.
- Identify the effects of changes in inventory levels on net operating income under absorption costing.
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Learning Objectives
- Cultivate an appreciation for the distinctions between absorption costing and variable costing and their ramifications on net operating income.
- Gauge the net operating income by applying absorption and variable costing techniques.
- Identify the effects of changes in inventory levels on net operating income under absorption costing.
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