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Question 2 10 Marks 26 Minutes Arm Pros Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income
Question 2 10 Marks 26 Minutes Arm Pros Inc. calculates income under absorption costing. The company provides bonuses to managers based on the operating income of the division. In 2021, the Muscle division has the following financial results: Sales (55,000 units) 5,500,000 Cost of Goods Sold Opening Inventory Cost of Goods Manufactured (70,000 units) Variable Costs 2,000,000 Fixed Costs 2,200,000 4,200,000 Ending Inventory 900,000 COGS 3,300,000 Gross Margin 2,200,000 Selling and Admin Expenses Variable 600,000 Fixed 900,000 1,500,000 Operating Income 700,000 The old manager for the Muscle division left in early 2021. A new manager was hired in 2022. The new manager produced 65,000 units and sold 68,000 units in 2022. REQUIRED A) Calculate the operating income for 2022 using absorption costing. Use an income statement to show your work. B) Calculate the operating income for 2022 using variable costing. Do not use an income statement as part of your calculation
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