Lasorsa Corporation manufactures a single product. Variable costing net operating income last year was $86,000 and this year was $98,000. Last year, $4,000 in fixed manufacturing overhead costs were released from inventory under absorption costing. This year, $27,000 in fixed manufacturing overhead costs were deferred in inventory under absorption costing. What was the absorption costing net operating income last year?
A)$63,000
B)$86,000
C)$90,000
D)$82,000

Question

Quizplus · Accepted Answer

To find the absorption costing net operating income last year, we need to adjust the variable costing net operating income by the fixed manufacturing overhead costs that were released from or deferred in inventory under absorption costing.

Adjustment = Fixed manufacturing overhead released from inventory - Fixed manufacturing overhead deferred in inventory 
Adjustment = $4,000 - $0 (since there was no deferral of fixed manufacturing overhead in the previous year) 
Adjustment = $4,000

Absorption costing net operating income last year = Variable costing net operating income last year + Adjustment 
Absorption costing net operating income last year = $86,000 + $4,000 
Absorption costing net operating income last year = $82,000

Therefore, the correct answer is D) $82,000.

Lasorsa Corporation Manufactures a Single Product