Using the information below,what would be the profit under variable costing and absorption costing,respectively?

A) $10 044;$8220
B) $9000;$13 176
C) $10 044;$14 220
D) Insufficient data to calculate

Question

Using the information below,what would be the profit under variable costing and absorption costing,respectively?

A) $10 044;$8220 
B) $9000;$13 176 
C) $10 044;$14 220 
D) Insufficient data to calculate

Quizplus · Accepted Answer

Under variable costing, the profit can be calculated as:
Sales revenue - Variable expenses = Contribution margin
$120,000 - ($44,000 + $24,000 + $16,800) = $35,200
Contribution margin - Fixed expenses = Profit
$35,200 - $25,156 = $10,044

Under absorption costing, the profit can be calculated as:
Sales revenue - Cost of goods sold - Fixed expenses = Profit
$120,000 - ($40,000 + ($22,000/5)) - $25,156 = $14,220

Therefore, the profit under variable costing is $10,044 and under absorption costing is $14,220. The correct answer is C.

Using the Information Below,what Would Be the Profit Under Variable