Question
Use the following information to answer the next two questions. Lindsay Company reported the following information for the first three years of operations. Year
Use the following information to answer the next two questions. Lindsay Company reported the following information for the first three years of operations. Year 1 Year 2 Year 3 Units produced 8,000 10,000 12,000 Units sold 6,000 11,000 9,000 Variable production cost per unit $5 $5 $5 Fixed production cost $24,000 $24,000 $24,000 Variable selling cost per unit $2 $2 $2 Fixed selling cost $16,000 $16,000 $16,000 Normal overhead base (in units) 10,000 12,000 8,000 Assume fixed overhead is applied based on the normal overhead base for each year. 7. (2 point) If the company had an operating income of $14,000 in Year 2 under variable costing, what was their operating income under absorption costing in Year 2? a. $16,000 b. $16,800 c. $12,000 d. $11,600 e. $10,400 f. $11,000 g. $11,200 h. None of the above 8. (2 point) If the company had an operating income of $45,600 in Year 3 under absorption costing, what was their operating income under variable costing in Year 3? a. $55,600 b. $35,600 c. $36,600 d. $40,000 e. $39,600 f. $38,400 g. $33,600 h. None of the above
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