A company's operating income was $70,000 using variable costing for a given period.Beginning and ending inventories for that period were 45,000 units and 50,000 units, respectively.Ignoring income taxes, if the fixed factory overhead application rate was $8.00 per unit, what would operating income have been using full costing?

Question

Quizplus · Accepted Answer

Using full costing means that fixed factory overhead costs are included in the cost of goods sold. The fixed overhead cost for the period can be calculated by multiplying the fixed factory overhead application rate by the number of units produced:

Fixed factory overhead cost = $8.00 x (50,000 units - 45,000 units) = $40,000

The cost of goods sold can be calculated as:

Variable cost of goods sold = $70,000

Fixed overhead cost = $40,000

Total cost of goods sold = $110,000

Operating income using full costing can be calculated as:

Sales revenue - total cost of goods sold = operating income

We don't have information about sales revenue, so we cannot determine the operating income using full costing without additional information. However, we can determine the correct answer choice based on the calculation of the total cost of goods sold using full costing.

Therefore, the best choice is C: $110,000.

A Company's Operating Income Was $70,000 Using Variable Costing for a Given