Baylor, Inc. just finished its second year of operations. In the first year it produced 1,000 units and sold 400. The second year resulted in the same production level, but sales were 1,200 units. The variable costing income statements for both years are shown below: Year 1 Year 2
Sales $ 40,000 $120,000
Variable cost of goods sold $22,000 $66,000
Variable selling and administration 800 22,800 2,400 68,400
Contribution margin 17,200 51,600
Fixed overhead 30,000 30,000
Fixed selling and administration 15,000 45,000 15,000 45,000
Operating income $(27,800)$ 6,600
The operating income for year 1 using absorption costing would be:
A)$6,000
B)$(9,000)
C)$(9,800)
D)$600

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The Answer of Baylor, Inc. just finished its second year of operations. In the first year it produced 1,000 units and sold 400. The second year resulted in the same production level, but sales were 1,200 units. The variable costing income statements for both years are shown below: Year 1 Year 2
Sales $ 40,000 $120,000
Variable cost of goods sold $22,000 $66,000
Variable selling and administration 800 22,800 2,400 68,400
Contribution margin 17,200 51,600
Fixed overhead 30,000 30,000
Fixed selling and administration 15,000 45,000 15,000 45,000
Operating income $(27,800)$ 6,600
The operating income for year 1 using absorption costing would be:
A)$6,000
B)$(9,000)
C)$(9,800)
D)$600