Under variable costing, the company's net operating income for the year would be:
A)$60,000 higher than under absorption costing
B)$108,000 higher than under absorption costing
C)$108,000 lower than under absorption costing
D)$60,000 lower than under absorption costing

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing overhead costs are treated as period expenses and not allocated to units produced. This results in lower inventory costs and higher cost of goods sold, which in turn lowers the net operating income. Therefore, the net operating income under variable costing would be $60,000 lower than under absorption costing based on the information given in the question.

Under Variable Costing, the Company's Net Operating Income for the Year