ts x Business Plan T Profit Saved mework 0 Exercise 1910 Com

ts x Business Plan T Profit Saved mework 0 Exercise 19-10 Computing absorption costing income LO P3 A manufacturer reports the information below for three recent years. Year Variable costing income Beginning finished goods inventory (units) Ending finished goods inventory (units) Fixed manufacturing overhead per unit $117,500 $122,400 $125,200 950 1,050 $ 4.20 4.20 4.20 1,450 950 1,450 Compute income for each of the three years using absorption costing Year 1Year 2 Year 3 Absorption costing income ? prev

Solution

Year 1

_{Variable Costing Income = 117,500}

_{Add: Fixed Manufacturing Overhead deferred in inventory = 4.20 * 1,450 = 6,090}

_Absorption Costing Income = 123,590

Year 2

_{Variable Costing Income = 122,400}

_{Less: Fixed Manufacturing Overhead released in inventory = 4.20 * 500 = 2,100}

_{Absorption Costing Income = 120,300}

_{Year 3}

_{Variable Costing Income = 125,200}

_{Add: Fixed Manufacturing Overhead deferred in inventory = 4.20 * 100 = 420}

Absorption Costing Income = 125,620