Adjusting variable cost income to absorption net income}

The fixed overhead budgeted for MacBeth Company at an expected capacity of 500,000 units is \(\$ 2,500,000\). Variable costing is used internally, and the net income is adjusted to an absorption costing net income at year-end. Data collected over the last three years show the following:

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Units produced Units sold.... Net income (variable cost) First Year Second Year Third Year 502,000 498,000 495,000 496,000 503,000 495,000 $500,000 $521,000 $497,000 Determine the adjustment needed each year to convert the variable costing income to absorption costing net income. Compute the absorp- tion costing net income for each year.