Financial & Managerial Accounting 13th Edition by Carl Warren , James Reeve,Jonathan Duchac

Exercise 3

Variable costing-sales exceed production
The beginning inventory is 11,600 units. All of the units that were manufactured during the period and 11,600 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $32 per unit, and variable manufacturing costs are $72 per unit. Determine (a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption costing income from operations.
The beginning inventory is 52,800 units. All of the units that were manufactured during the period and 52,800 units of the beginning inventory were sold. The beginning inventory fixed manufacturing costs are $14.70 per unit, and variable manufacturing costs are $30 per unit. Determine (a) whether variable costing income from operations is less than or greater than absorption costing income from operations, and (b) the difference in variable costing and absorption costing income from operations.