Question
Krepps Corporation produces a single product. Last year, Krepps manufactured 31,770 units and sold 26,400 units. Production costs for the year were as follows: Direct
Krepps Corporation produces a single product. Last year, Krepps manufactured 31,770 units and sold 26,400 units. Production costs for the year were as follows:
Direct materials | $228,744 |
---|---|
Direct labor | $142,965 |
Variable manufacturing overhead | $247,806 |
Fixed manufacturing overhead | $508,320 |
Sales totaled $1,161,600 for the year, variable selling and administrative expenses totaled $139,920, and fixed selling and administrative expenses totaled $225,567. There was no beginning inventory. Assume that direct labor is a variable cost.
Under variable costing, the company's net operating income for the year would be:
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$31,683 lower than under absorption costing.
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$31,683 higher than under absorption costing.
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$85,920 lower than under absorption costing.
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$85,920 higher than under absorption costing.
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