Answer:
the absorption costing net operating income last year is $41,200
Explanation:
Absorption Costing Net Operating Income for last year is determined by reconciling the Variable Costing Income to Absorption Costing Income.
<u>Calculation of Absorption Costing Net Operating Income</u>
Variable Costing Income $52,400
<em>Less</em> Decrease in Inventory ( 1,400 × $8) ($11,200)
Absorption Costing Net Operating Income $41,200
Absorption Costing Net Operating Income will be <em>lower than </em>Variable Costing Income.
Answer:
- $45000
Explanation:
Economic profit is different from accounting profit in the sense that former also takes into consideration the implicit costs, also referred to as opportunity costs unlike the latter.
Economic Profit = Accounting profit - Opportunity Costs
Opportunity costs are defined as the the cost of sacrificed or foregone alternative for pursuing a particular alternative. Such costs are implicit or notional as they are not actually incurred.
In the given case, Economic Profit = Revenues - Explicit costs - Implicit costs
Here, the implicit cost is $60,000 income foregone.
Thus, Economic Profit = $20,000(income) - $ 5000 (expense) - $60,000 (opportunity cost)
Economic Profit = ($ 45,000) or -$45,000.
D. Reading everything very quickly
