Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table: Given this information, which of the following is true?
A) Net income under variable costing will exceed net income under absorption costing by $50,000.
B) Net income under absorption costing will exceed net income under variable costing by $50,000.
C) Net income will be the same under both absorption and variable costing.
D) Net income under variable costing will exceed net income under absorption costing by $60,000.
E) Net income under absorption costing will exceed net income under variable costing by $60,000.

Question

Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table:  Given this information, which of the following is true?
A) Net income under variable costing will exceed net income under absorption costing by $50,000. 
B) Net income under absorption costing will exceed net income under variable costing by $50,000. 
C) Net income will be the same under both absorption and variable costing. 
D) Net income under variable costing will exceed net income under absorption costing by $60,000. 
E) Net income under absorption costing will exceed net income under variable costing by $60,000.

Quizplus · Accepted Answer

100,000 units × ($450,000/900,000 FOH) = $50,000 inventoried under absorption and expensed under variable costing.