During 2025, KM Construction sold 10,000 units, with beginning and ending units for the year of 1,000. Manufacturing costs were as follows: Which of the following statements is true?
A)Net income will be the same under both variable and absorption costing.
B)Net income under variable costing will be $45,000 less than net income under absorption costing.
C)Net income under absorption costing will be $40,000 more than under variable costing.
D)The difference in net income cannot be determined.

Question

During 2025, KM Construction sold 10,000 units, with beginning and ending units for the year of 1,000. Manufacturing costs were as follows:  Which of the following statements is true?
A)Net income will be the same under both variable and absorption costing. 
B)Net income under variable costing will be $45,000 less than net income under absorption costing. 
C)Net income under absorption costing will be $40,000 more than under variable costing. 
D)The difference in net income cannot be determined.

Quizplus · Accepted Answer

Since the inventory level did not change, the number of units manufactured equals the number of units sold. Therefore, operating income is unchanged between variable and absorption costing.

During 2025, KM Construction Sold 10,000 Units, with Beginning and Ending