Answered step by step
Verified Expert Solution
Question
1 Approved Answer
During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable
During its first year of operations, the McCormick Company incurred the following manufacturing costs: Direct materials, $5 per unit, Direct labor, $3 per unit, Variable overhead, $4 per unit, and Fixed overhead, $250,000. The company produced 25,000 units, and sold 20,000 units, leaving 5,000 units in inventory at year-end. Income calculated under variable costing is determined to be $315,000. How much income is reported under absorption costing? A) $315,000 B) $265,000 C) $565,000 D) $290,000 E) $365,000 Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table: 0.80 per Production costs Direct materials Direct labor Variable overhead Fixed overhead Non-production costs Variable selling and administrative Fixed selling and administrative $ unit $ 0.70 per unit $ 500,000 in total $ 450,000 in total $ 30,000 in total $ 490,000 in total Given this information, which of the following is true? A) Net income will be the same under both absorption and variable costing. B) Net income under variable costing will exceed net income under absorption costing by $60,000. C) Net income under variable costing will exceed net income under absorption costing by $50,000. D) Net income under absorption costing will exceed net income under variable costing by $50,000. E) Net income under absorption costing will exceed net income under variable costing by $60,000
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started