During this past year, Bouncy Company experienced no change in inventory. Sales were 40,000 units at a selling price of £3 per unit. Variable manufacturing costs were £1.25 per unit, and total manufacturing costs were £55,000. Under absorption costing, net income was calculated at £53,000. What was net income under variable costing?
A)£65,000
B)£55,000
C)£53,000
D)£2,000

Question

Quizplus · Accepted Answer

Under variable costing, only variable costs are considered in product costing. Since there was no change in inventory, the total cost of goods sold under variable costing would be the same as under absorption costing. Therefore, the net income remains unchanged at £53,000.

During This Past Year, Bouncy Company Experienced No Change in Inventory