Diego Company manufactures one product that is sold for $76 per unit. The following information pertains to the companys first year of operations in which it produced 58,000 units and sold 54,000 units.

Variable costs per unit:
Manufacturing:
Direct materials	$	23
Direct labour	$	15
Variable manufacturing overhead	$	3
Variable selling and administrative	$	3
Fixed costs per year:
Fixed manufacturing overhead	$	1,160,000
Fixed selling and administrative expenses	$	640,000

What is the companys total contribution margin under variable costing?

What is the companys net operating income (loss) under variable costing?

What is the companys total gross margin under absorption costing?

What is the amount of the difference between the variable costing and absorption costing net operating incomes (losses)?

What is the companys break-even point in unit sales?

What would have been the companys variable costing net operating income (loss) if it had produced and sold 54,000 units?

What would have been the companys absorption costing net operating income (loss) if it had produced and sold 54,000 units?

If the company produces 4,000 fewer units than it sells in its second year of operations, will absorption costing net operating income be higher or lower than variable costing net operating income in Year 2?

multiple choice

• Higher

• Lower