Last year,Heidenescher Corporation's variable costing net operating income was $63,600 and its inventory decreased by 600 units.Fixed manufacturing overhead cost was $1 per unit.What was the absorption costing net operating income last year?
A)$64,200
B)$63,000
C)$63,600
D)$600

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing overhead is included in the cost of inventory. Since inventory decreased by 600 units, the fixed overhead cost of $600 (600 units x $1) was released from inventory, reducing the net operating income by $600. Therefore, the absorption costing net operating income is $63,600 - $600 = $63,000.

Last Year,Heidenescher Corporation's Variable Costing Net Operating Income Was $63,600