Asked by khuong huynh on Jun 19, 2024
Verified
Toth,Inc.had net income of $950,000 based on variable costing.Beginning and ending inventories were 60,000 units and 56,000 units,respectively.Assume the fixed overhead cost per unit was $.85 for both the beginning and ending inventory.What is net income under absorption costing?
Variable Costing
A costing method where variable manufacturing costs are treated as product costs, and fixed manufacturing overhead is treated as a period cost.
Net Income
The amount of earnings left after all expenses, including taxes and costs, have been subtracted from total revenue.
Fixed Overhead
Fixed overhead consists of the consistent, ongoing costs not directly tied to production levels within a business, such as rent, insurance, and salaries.
- Ascertain the net income by applying both variable costing and absorption costing approaches.
- Apprehend the handling of fixed overhead expenses in each of the costing methodologies.
Verified Answer
AW
Asharia WoolardJun 19, 2024
Final Answer :
Income under variable costing + FOH in Ending inventory - FOH in Beginning inventory = Income under absorption costing
$950,000 + (56,000 units × $.85)- (60,000 × $.85)= $946,600
$950,000 + (56,000 units × $.85)- (60,000 × $.85)= $946,600
Learning Objectives
- Ascertain the net income by applying both variable costing and absorption costing approaches.
- Apprehend the handling of fixed overhead expenses in each of the costing methodologies.