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KM Toys started 2020 with no inventories. During the year, their expected and actual production was 32,000 units, of which they sold 28,800 units at
KM Toys started 2020 with no inventories. During the year, their expected and actual production was 32,000 units, of which they sold 28,800 units at $40 each. Cost data for the year is as follows: Click the icon to view the cost data) Calculate KM Toys' operating income under (1) variable costing, and (2) absorption costing. Explain why operating income differs under the two approaches. Begin calculating KM Toys' operating income under (1) variable costing. (If an input field is not used in the table, leave the input field empty, do not select a label or enter a zero.) Operating income Now calculate KM Toys' operating income under (2) absorption costing. (If an input field is not used in the table, leave the input field empty; do not select a label or enter a zero.) X Data table Manufacturing costs incurred: Variable Fixed: Marketing costs incurred: Variable: S 570,000 $ 358,400 Operating income S 142,500 Fixed: S 76,300 Absorption posting treats fixed manufacturing cost as a while variable costing treats it as a KM Toys has units in ending inventory. Under absorption costing, these units have a fixed manufacturing cost of per unit. So the total fixed manufacturing cost in ending inventory under absorption costing is Since these costs are inventoried under costing, and not expensed as they would be under costing, operating income is under absorption costing by Print Done
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