Jupiter Corporation incurred fixed manufacturing costs of $18,000 during 2017. Other information for 2017 includes:
The budgeted denominator level is 2,400 units.
Units produced total 2,700 units.
Units sold total 1,600 units.
Variable cost per unit is $4
Beginning inventory is zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.
The operating income using variable costing will be ________ as compared to the operating income under absorption costing. (Round any intermediary calculations to the nearest cent and your final answer to the nearest dollar.)
A) lower by $8,250.00
B) lower by $2,250.00
C) higher by $8,250.00
D) higher by $2,250.00

Question

Quizplus · Accepted Answer

The fixed manufacturing expense attributable to each unit produced is 11ea1398_f09e_6321_a1e4_270c22eff955_TB3027_11 . Different operating incomes are reported because the unit level of inventory increased during the accounting period by 1,100 units × $7.50 denominator rate for fixed manufacturing costs = $8,250.00. Therefore, the operating income is $8,250.00 higher under absorption costing because $8,250.00 of fixed manufacturing costs remains in inventory under absorption which are expensed under variable costing costing.

Jupiter Corporation Incurred Fixed Manufacturing Costs of $18,000 During 2017