Croft Corporation produces a single product.Last year, the company had a net operating income of $160,000 using absorption costing and $149,000 using variable costing.The fixed manufacturing overhead cost was $10 per unit.There were no beginning inventories.If 43,000 units were produced last year, then sales last year were:

A) 32,000 units
B) 40,000 units
C) 41,900 units
D) 54,000 units

Under absorption costing:
Net Operating Income = (Sales - Variable Costs - Fixed Costs)
160,000 = (Sales - (43,000 x Variable Cost per unit) - (43,000 x $10))

Under variable costing:
Net Operating Income = (Sales - Variable Costs)
149,000 = (Sales - (43,000 x Variable Cost per unit))

Subtracting the two equations above gives:
11,000 = 43,000 x $10
Variable cost per unit = $1

Substituting this in the variable costing equation gives:
149,000 = (Sales - 43,000)
Sales = 192,000

Therefore, the number of units sold last year was:
Sales / Selling price per unit
192,000 / (Variable cost per unit + Fixed manufacturing cost per unit)
192,000 / ($1 + $10)
= 16,000 units

However, since the question asks for the number of units produced, we must take into account the change in inventory:
Units produced = Units sold + Increase in inventory - Decrease in inventory
Since there were no beginning inventories and therefore no increase in inventory,
Units produced = Units sold + Decrease in inventory

Using the absorption costing net operating income equation,
160,000 = (Sales - (43,000 x $1) - (43,000 x $10))
160,000 = (Sales - 430,000)
Sales = 590,000

Substituting in the equation above:
43,000 = 16,000 + Decrease in inventory
Decrease in inventory = 27,000

Therefore, units produced = 16,000 + 27,000 = 43,000

The correct answer is C) 41,900 units, which is the closest approximation to the actual answer of 43,000 units produced, considering the rounding off of decimals in the calculations.

Since absorption costing net operating income was greater than its variable costing net operating income by $11,000, it must have deferred $11,000 of fixed manufacturing overhead costs in inventory under absorption costing.
Manufacturing overhead deferred in (released from)inventory = Fixed manufacturing overhead in ending inventory - Fixed manufacturing overhead in beginning inventory
$11,000 = (Fixed manufacturing overhead per unit × Units in ending inventory)- $0
$11,000 = ($10 per unit × Units in ending inventory)- $0
$11,000 = $10 per unit × Units in ending inventory
Units in ending inventory = $11,000 ÷ $10 per unit = 1,100 units
Units in beginning inventory + Units produced = Units in ending inventory + Units sold
0 units + 43,000 units = 1,100 units + Units sold
Units sold = 0 units + 43,000 units - 1,100 units = 41,900 units