Raymond Company
Raymond Company reported the following units of production and sales for June and July: $$\begin{array} { l r r }
& \text { Units } & \text { Units } \
\text { Month } & \text { Produced } & \text { Sold } \
\text { June } & 100,000 & 90,000 \
\text { July } & 100,000 & 105,000
\end{array}$$ Net income using the absorption costing method for June was $40,000; net income using the variable costing method for July was $50,000. Fixed manufacturing costs were $600,000 for each month.
-Refer to Raymond Company. What was the net income for June using the variable costing method?
A) $20,000 net loss
B) $20,000 net income
C) $40,000 net loss
D) $40,000 net income

Question

Raymond Company
Raymond Company reported the following units of production and sales for June and July: $$\begin{array} { l r r } 
& \text { Units } & \text { Units } \
\text { Month } & \text { Produced } & \text { Sold } \
\text { June } & 100,000 & 90,000 \
\text { July } & 100,000 & 105,000
\end{array}$$ Net income using the absorption costing method for June was $40,000; net income using the variable costing method for July was $50,000. Fixed manufacturing costs were $600,000 for each month.
-Refer to Raymond Company. What was the net income for June using the variable costing method?
A) $20,000 net loss
B) $20,000 net income
C) $40,000 net loss
D) $40,000 net income

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing costs are expensed in the period incurred. In June, 10,000 more units were produced than sold, so $60,000 ($600,000/100,000 units * 10,000 units) of fixed costs are deferred in inventory under absorption costing. Therefore, net income under variable costing is $40,000 - $60,000 = -$20,000.

Raymond Company Raymond Company Reported the Following Units of Production

Raymond Company
Raymond Company Reported the Following Units of Production