X Company Reported Operating Income for Year 2 of $1,200,000

Essay

X Company reported operating income for Year 2 of $1,200,000 under variable costing and $1,600,000 under absorption costing.The total variable manufacturing cost of the company's ending finished goods inventory was $120,000.The cost of the company's beginning-of-year finished goods inventory under absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing.
Required:
a)Calculate the cost of ending finished goods inventory under absorption costing.
b)Compare the cost of your ending finished inventory under absorption costing in part (a)with that given under variable costing.Does the difference make sense? Why or why not?