Bush Corporation The following information has been extracted from the financial records of Bush Corporation for its first year of operations:
Refer to Bush Corporation.Based on absorption costing,Bush Corporation's income in its first year of operations will be
A)$21,000 higher than it would be under variable costing.
B)$70,000 higher than it would be under variable costing.
C)$30,000 higher than it would be under variable costing.
D)higher than it would be under variable costing,but the exact difference cannot be determined from the information given.

Question

Bush Corporation The following information has been extracted from the financial records of Bush Corporation for its first year of operations:
 Refer to Bush Corporation.Based on absorption costing,Bush Corporation's income in its first year of operations will be
A)$21,000 higher than it would be under variable costing. 
B)$70,000 higher than it would be under variable costing. 
C)$30,000 higher than it would be under variable costing. 
D)higher than it would be under variable costing,but the exact difference cannot be determined from the information given.

Quizplus · Accepted Answer

Absorption costing includes fixed manufacturing overhead costs in the cost of goods sold, while variable costing only includes variable costs. In the first year of operations, Bush Corporation had $21,000 of fixed manufacturing overhead costs that were included in inventory and then expensed in the cost of goods sold under absorption costing. These costs would not have been incurred under variable costing, resulting in a higher income under absorption costing.

Bush Corporation the Following Information Has Been Extracted from the Financial