Yazzie,Inc.reports the following information for the year ended December 31:

The operating income calculated using variable costing and absorption costing amounted to $9300 and $11,400,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under variable costing for the year 2016.

Question

Yazzie,Inc.reports the following information for the year ended December 31:

The operating income calculated using variable costing and absorption costing amounted to $9300 and $11,400,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under variable costing for the year 2016.

Quizplus · Accepted Answer

A)Number of units in the ending Fixed Goods Inventory = (Profit using absorption costing - Profit using variable costing)/ Fixed manufacturing overhead per unit =
($11,400 - $9300)/ $30 per unit = 70 units
Number of units produced = Units sold + Ending Inventory - Beginning Inventory
Number of units produced = 620 units + 70 units - 0 = 690 units
Under variable costing,total fixed manufacturing overhead incurred during the period are expensed,irrespective of the period in which the units are sold.
Therefore,total fixed manufacturing overhead expensed under variable costing =
690 units × $30 per unit = $20,700