Question

Norenberg Corporation manufactures a single product. The following data pertain to the company's operations over the last two years:
Variable costing net operating income, last year $ 88,600
Variable costing net operating income, this year $ 96,100
Beginning inventory, last year 0 units
Ending inventory, last year 3,600 units
Ending inventory, this year 1,300 units
Fixed manufacturing overhead cost per unit this year and last year $ 7 per unit

What was the absorption costing net operating income this year?

a. $80,000
b. $100,500
c. $108,000
d. $112,200

Answer 1

Answer:

The current option is D,$112,200

Explanation:

Absorption costing net operating income can derived by adding the fixed costs on closing inventory to net operating income from variable costing method since the difference between the tow methods is that absorption costing methods only consider an expense in the current year the fixed costs on  items sold,by implication the fixed costs on closing inventory are deferred till when closing inventory is sold

Absorption costing net income=$96,100+(3600-1300)*$7

                                                   =$112,200

The correct option is D