Waterloo Skyline experienced the following costs in 2017: $\begin{array}{ll}
\text { Direct materials } & \$ 3.15 \text { per unit } \
\text { Direct labor } & \$ 2.80 \text { per unit } \
\text { Variable manufacturing overhead } & \$ 1.45 \text { per unit }\\text { Fixed manufacturing overhead }&\$ 12.60 \text { per unit }
\end{array}$ There was no beginning inventory.During the year, the company sold 190,000 units.If net income using full and variable costing was $939,020 and $905,000, respectively, how many units did the company produce in 2017?
A)192,700
B)2,700
C)187,300
D)46,951

Question

Quizplus · Accepted Answer

The difference in net income between full and variable costing is due to the fixed manufacturing overhead applied to the ending inventory. The difference is $34,020 ($939,020 - $905,000). Since fixed manufacturing overhead is $12.60 per unit, the ending inventory must be 2,700 units ($34,020 / $12.60). Therefore, the company produced 192,700 units (190,000 units sold + 2,700 units in ending inventory).

Waterloo Skyline Experienced the Following Costs in 2017 There Was No Beginning Inventory