Exeter Ltd

Multiple Choice

Exeter Ltd. introduced a new mass-produced specialty product early in the year. Production and sales of this product for the first four months are as follows: The firm's budgeted fixed overhead is $200,000, and budgeted output is 1,000 units per month. The volume variance, if any, is carried forward month-by-month and closed at the end of the year. When 1,000 units are produced and sold, expected monthly operating profit is $40,000.
In which month(s) was variable costing profit lower than absorption costing profit?

A) 4
B) 1, 2, and 3
C) 2 and 3
D) 3 and 4