Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year: The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For 2026,
A)absorption costing operating income exceeded variable costing operating income by $5,000.
B)variable costing operating income exceeded absorption costing operating income by $5,000.
C)the operating income for absorption costing equaled operating income for variable costing.
D)the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing.

Question

Stanczyk Inc. started operations in January 2025. The company produces and sells cabinets for $5,200 each. The following information pertains to the cost and sales of the cabinets each year:  The company produced 25 units per year for 2025, 2026, and 2027. The company sold 22 units in 2025, 20 units in 2026, and 26 units in 2027. It reported no volume variances for the three-year period. For 2026,
A)absorption costing operating income exceeded variable costing operating income by $5,000. 
B)variable costing operating income exceeded absorption costing operating income by $5,000. 
C)the operating income for absorption costing equaled operating income for variable costing. 
D)the operating income for absorption costing may be greater than, equal to or less than operating income under variable costing.

Quizplus · Accepted Answer

$25,000 ÷ 25 = $1,000 per unit.
($5,200 x 20) - (($2,300 + $1,000) x 20) = $38,000
$38,000 - ($65 x 20) - $12,000 = $24,700 (Absorption)
($5,200 x 20) - (($2,300 + $65) x 20) = $56,700
$56,700 - $25,000 - $12,000 = $19,700 (Variable)
$24,700 - $19,700 = $5,000
FMOH ÷ units produced = FMOH per unit
(sale price per unit x units sold) - ((VM costs per unit + FM costs per unit) x units sold) = GM
GM - (V op exp per unit x units sold) - F Op exp = Abs op income
(sale price per unit x units sold) - ((VM costs per unit + V Op costs per unit) x units sold) = CM
CM - FM cost = F op costs = variance op income
Abs op income - variance op income = variance