ABC Company produces and sells harddisk. The company has no beginning inventory, it produced 50,000 units and sold 56,000 units during the period.

Net operating income under absorption costing is four million dollors. Fixed manufacturing overhead incurred for the above production process was $310,000.

Required:

(a) Compute the units which make the difference in the two systems (variable costing and absorption costing). (1 mark)

(b) Compute the manufacturing overhead cost per unit which makes the difference in the two systems. (1 mark)

(c) Use vertical 1 column and 3 rows schedule to compute the variances between the variable costing and absorption costing net operating income figures. (4 marks)