Crystal Corporation produces a single product.The company's variable costing income statement for the month of May appears below: The company produced 80,000 units in May and the beginning inventory consisted of 25,000 units.Variable production costs per unit and total fixed costs have remained constant over the past several months. Under absorption costing,for May the company would report a:
A)$30,000 loss
B)$0 profit
C)$30,000 profit
D)$60,000 profit

Question

Crystal Corporation produces a single product.The company's variable costing income statement for the month of May appears below:  The company produced 80,000 units in May and the beginning inventory consisted of 25,000 units.Variable production costs per unit and total fixed costs have remained constant over the past several months. Under absorption costing,for May the company would report a:
A)$30,000 loss 
B)$0 profit 
C)$30,000 profit 
D)$60,000 profit

Quizplus · Accepted Answer

Units sold = $900,000 ÷ $10 per unit = 90,000 units
Units in beginning inventory + Units produced = Units sold + Units in ending inventory
25,000 units + 80,000 units = 90,000 units + Units in ending inventory
Units in ending inventory = 25,000 units + 80,000 units - 90,000 units = 15,000 units
Manufacturing overhead deferred in (released from)inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory
= ($3 per unit × Units in ending inventory)- ($3 per unit × Units in beginning inventory)
= $3 per unit × (Units in ending inventory - Units in beginning inventory)
= $3 per unit × (15,000 units - 25,000 units)
= -$30,000
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Crystal Corporation Produces a Single Product