46. Pungent Corporation manufactures and sells a spice rack. Shown below are the actual operating results for
the first two years of operations:
Units (spice racks) produced.................................
Units (spice racks) sold.........................................
Absorption costing net operating income.............
Variable costing net operating income..................
A)
B)
C)
D)
Year 1
40,000
37,000
$44,000
$38,000
Year 2
40,000
41,000
$52,000
???
Pungent's cost structure and selling price were the same for both years. What is Pungent's variable
costing net operating income for Year 2?
$48,000
$50,000
$54,000
$56,000
Ans: C
Level: Hard
Solution:
Unit fixed manufacturing overhead = Difference in net income ÷ Change in inventory = ($44,000 –
$38,000) ÷ (40,000 – 37,000) = $6,000 ÷ 3,000 = $2
Variable costing net operating income = Absorption costing net income − Difference in net operating
income
= $52,000 − [(40,000 − 41,000) × $2)]
= $52,000 − ($2,000) = $54,000
47. Sipho Corporation manufactures a variety of products. Last year, the company's variable costing net
operating income was $90,900. Fixed manufacturing overhead costs released from inventory under
absorption costing amounted to $21,900. What was the absorption costing net operating income last
year?
A)
$69,000
B)
$90,900
C)
$21,900
D)
$112,800
Ans: A
Solution:
Absorption costing net income = Variable costing net income – fixed manufacturing overhead costs
released from inventory
= $90,900 – $21,900 = $69,000
48. Last year, Kirsten Corporation's variable costing net operating income was $63,400. Fixed manufacturing
overhead costs released from inventory under absorption costing amounted to $10,700. What was the
absorption costing net operating income last year?
A)
$10,700
B)
$74,100
C)
$63,400
D)
$52,700
Ans: D
Solution:
Absorption costing net income = Variable costing net income – fixed manufacturing overhead costs
released from inventory
= $63,400 – $10,700 = $52,700
49. Bellue Inc. manufactures a variety of products. Variable costing net operating income was $96,300 last
year and ending inventory decreased by 2,600 units. Fixed manufacturing overhead cost was $1 per unit.
What was the absorption costing net operating income last year?
A)
$2,600
B)
$93,700
C)
$96,300
D)
$98,900
Ans: B
Solution:
Absorption costing net income = Variable costing net income − fixed manufacturing overhead costs
released from inventory