Variable costing income for the period July 1 through September 30 was $400. Inventory data are as follows: Absorption Costing Variable Costing
July 1 $1,600 $1,200
September 30 1,900 1,400
What is the income if absorption costing is used?
A)$300
B)$500
C)$400
D)$600

Question

Quizplus · Accepted Answer

Using the inventory data, we can calculate the increase in inventory under absorption costing and subtract it from the variable costing income to get the income under absorption costing.

Increase in inventory value under absorption costing = 1,900 – 1,600 = $300
Income under absorption costing = Variable costing income – Increase in inventory value
Income under absorption costing = $400 - $300
Income under absorption costing = $100

Therefore, the income if absorption costing is used is $100. The best choice is option B.

Variable Costing Income for the Period July 1 Through September