Bernardo Company reported the following units of production and sales for August and September 2014: Net income under absorption costing for August was $40,000; net income under variable costing for September was $50,000. Fixed manufacturing costs were $600,000 for each month.
How much was net income for August using variable costing?
A) $40,000
B) $20,000
C) $(20,000)
D) $(40,000)

Question

Bernardo Company reported the following units of production and sales for August and September 2014:  Net income under absorption costing for August was $40,000; net income under variable costing for September was $50,000. Fixed manufacturing costs were $600,000 for each month.
How much was net income for August using variable costing?
A) $40,000 
B) $20,000 
C) $(20,000) 
D) $(40,000)

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing costs are treated as a period expense and are not included in the cost of goods sold. Therefore, the net income for August under variable costing would be the same as the net income under absorption costing, which is $40,000. Option C is the only choice that reflects a decrease in net income from August to September, which is consistent with the information given.

Bernardo Company Reported the Following Units of Production and Sales