The Rehe Company sells its product at $5 per unit. The company uses a first-in, first-out actual costing system. That is, a new fixed-factory-overhead allocation rate is computed each year by dividing the actual fixed factory overhead by the actual production. The firm has no ending work-in-process each year. The following simplified data relate to its first two years of operation: Sales Production Costs: A. variable costing Year 1 1,100 units 1,400 units Manufacturing - variable - fixed Selling and Administrative: - variable - fixed Calculate Rehe's operating income in Year 2 under: B. absorption costing $ 2,800 700 1,100 300 Year 2 1,200 units 1,000 units $ 2,000 700 1,200 300

The Rehe Company sells its product at $ per unit. The company uses a first-in, first-out actual costing system. That is, a new fixed-factory-overhead allocation rate is computed each year by dividing the actual fixed factory overhead by the actual production. The firm has no ending work-in-process each year. The following simplified data relate to its first two years of operation: Calculate Rebe's operating income in Year 2 under: A. variable costing B. absorption costing