The following data are available for Cavaliers Company for the year:
Sales: 38,000 units at $\$ 50$ each
Expected and actualproduction: $\quad \mathbf { 4 0 , 0 0 0 }$ units
Manufacturingcosts incurred:
Variable: $\quad \$ 1,400,000$
Fixed: $\$ 228,000$
Nonmanufacturingcosts incurred:
Variable: $\quad \$ 76 , 0 0 0 $
Fixed: $\$ 135,000$
Beginninginventories: none Required
a. Determine operating income using the variable- costing approach.
b. Determine operating income using the absorption- costing approach.
c. Explain why operating income is not the same under the two approaches.

Question

The following data are available for Cavaliers Company for the year:
 Sales: 38,000 units at $\$ 50$ each
Expected and actualproduction: $\quad \mathbf { 4 0 , 0 0 0 }$ units
Manufacturingcosts incurred:
Variable: $\quad \$ 1,400,000$
Fixed: $\$ 228,000$
Nonmanufacturingcosts incurred:
Variable: $\quad \$ 76 , 0 0 0 $
Fixed: $\$ 135,000$
Beginninginventories: none Required
a. Determine operating income using the variable- costing approach.
b. Determine operating income using the absorption- costing approach.
c. Explain why operating income is not the same under the two approaches.

Quizplus · Accepted Answer

The Answer of The following data are available for Cavaliers Company for the year:
 Sales: 38,000 units at $\$ 50$ each
Expected and actualproduction: $\quad \mathbf { 4 0 , 0 0 0 }$ units
Manufacturingcosts incurred:
Variable: $\quad \$ 1,400,000$
Fixed: $\$ 228,000$
Nonmanufacturingcosts incurred:
Variable: $\quad \$ 76 , 0 0 0 $
Fixed: $\$ 135,000$
Beginninginventories: none Required
a. Determine operating income using the variable- costing approach.
b. Determine operating income using the absorption- costing approach.
c. Explain why operating income is not the same under the two approaches.

The Following Data Are Available for Cavaliers Company for the Year