In 2008 the Jetson Company reported net operating income of $160,000 using absorption costing and $146,000 using variable costing. With this information only it is known that:
A) Units sold exceeded units produced
B) Units produced and sold were equal
C) There was no beginning inventory
D) Units produced exceeded units sold

Question

Quizplus · Accepted Answer

The difference in net operating income between absorption and variable costing means that there was a difference in inventory levels at the beginning and end of the period. Since net operating income is higher with absorption costing, this means that more units were produced than sold, resulting in a higher ending inventory under absorption costing compared to variable costing. Therefore, D is the best choice.

In 2008 the Jetson Company Reported Net Operating Income of $160,000