Gumby’s Gum produces large amounts of gum each year. This year, Gumby’s produced 45,000 packs of gum but only sold 42,000 of the packs. Each pack sells for $1.50. Selected operational and financial data are shown below.
Variable costs per unit:
Production ......... $ .50
S&A ............ .10
Fixed costs in total:
Production ......... $6,000
S&A .......... $3,000

Required
A. Calculate Gumby’s net income using variable costing.
B. Will income be higher or lower if calculated using absorption costing?
C. By how much?