Starfish Company manufactures diving masks with a standard variable cost of ($12.50) . The masks sell for

Question:

Starfish Company manufactures diving masks with a standard variable cost of $$12.50$ . The masks sell for $$17.00$ . Budgeted fixed manufacturing overhead for the most recent year was $$396,000$ . Actual production was equal to planned production.

Required:

Under each of the following conditions, state (a) whether income is higher under variable or absorption costing and (b) the amount of the difference in reported income under the two methods. Treat each condition as an independent case.

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