Hansen Company produces a single product.During the last year,Hansen had net operating income under absorption costing that was $5,500 lower than its income under variable costing.The company sold 9,000 units during the year,and its variable costs were $10 per unit,of which $6 was variable selling expense.If fixed production cost is $5 per unit under absorption costing every year,then how many units did the company produce during the year?
A)7,625 units
B)8,450 units
C)10,100 units
D)7,900 units

Question

Quizplus · Accepted Answer

Since net operating income under absorption costing was $5,500 lower than under variable costing,inventories must have decrease
Fixed manufacturing overhead costs released from inventory under absorption costing = Fixed manufacturing overhead per unit F1F1F1S1F1F1F10 Reduction in the units in inventory
$5,500 = $5 per unit F1F1F1S1F1F1F10 Reduction in the units in inventory
Reduction in the units in inventory = $5,500 F1F1F1S1F1F1F10 $5 per unit = 1,100 units
Units in beginning inventory + Units produced = Units sold + Units in ending inventory
Units in beginning inventory - Units in ending inventory = Units sold - Units produced
Reduction in the units in inventory = Units sold - Units produced
1,100 units = 9,000 units - Units produced
Units produced = 9,000 units - 1,100 units = 7,900 units

Hansen Company Produces a Single Product