Figure 7-1
The following information pertains to Mayberry Ltd.: $\begin{array}{lr}
\text { Beginning inventory } & 1,000 \text { units } \
\text { Ending inventory } & 6,000 \text { units } \
\text { Direct labour per unit } & £ 40 \
\text { Direct materials per unit } & 20 \
\text { Variable overhead per unit } & 10 \
\text { Fixed overhead per unit } & 30 \
\text { Variable selling and admin. costs per unit } & 6 \
\text { Fixed selling and admin. costs per unit } & 14
\end{array}$
-Refer to Figure 7-1. Absorption costing net income would be ____ variable costing net income.
A)£150,000 greater than
B)£150,000 less than
C)£240,000 less than
D)£240,000 greater than

Question

Quizplus · Accepted Answer

Absorption costing net income is greater than variable costing net income by the amount of fixed overhead applied to ending inventory. In this case, the fixed overhead applied to ending inventory is £180,000 (6,000 units x £30 per unit). Therefore, absorption costing net income would be £180,000 greater than variable costing net income.

Figure 7-1 the Following Information Pertains to Mayberry Ltd -Refer to Figure 7-1

Figure 7-1
the Following Information Pertains to Mayberry Ltd -Refer to Figure 7-1