Willis Company had a net operating income of £75,000 using variable costing and a net operating income of £57,000 using absorption costing. Variable production costs were £15 per unit. Total fixed manufacturing overhead was £120,000 and 10,000 units were produced. During the year, the stock level
A)increased by 1,200 units.
B)increased by 1,500 units.
C)decreased by 1,500 units.
D)decreased by 1,200 units.

Question

Quizplus · Accepted Answer

The difference in net operating income between variable and absorption costing is due to the change in inventory levels. The difference of £18,000 in income suggests that 1,200 units (18,000/15) were released from inventory, indicating a decrease.

Willis Company Had a Net Operating Income of £75,000 Using