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Felix and Oscar Industries makes artificial Christmas trees. The unit costs for producing a tree are: The company incurs $1 per tree in variable selling
Felix and Oscar Industries makes artificial Christmas trees. The unit costs for producing a tree are: The company incurs $1 per tree in variable selling and administrative costs and $4,000 in fixed marketing costs. At the beginning of 2021 the company had 900 trees in the beginning finished goods inventory. The company produced 2,000 more trees during the year. Sales totaled 1,500 trees at a price of $100 per tree. Required: a. Based on absorption costing, what was the company's operating income for 2021? b. Based on variable costing, what was the company's operating income for 2021 ? c. Assume that in 2022 the company produced 2,000 trees and sold 2,500. Based on absorption costing, what was the operating income for 2022 ? Based on variable costing, what was the operating income for 2022? d. For both 2021 and 2022, explain why the operating income based on absorption costing differed from the operating income based on variable costing
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