A company with fixed manufacturing costs of $500,000 produces 100,000 units in 2017 and 125,000 units in 2015.The company sells 90,000 units each in both years.Other costs and selling price are unchanged for 2017 and 2018.Assume that there was no beginning inventory in 2017.Which of the following is true?
A)Variable costing income will be greater in 2017 than in 2018.
B)The dollar amount of ending inventory will be greater in 2017 than in 2018.
C)Variable costing income will be the same in 2018 and 2017.
D)All of these answer choices are correct.

Question

Quizplus · Accepted Answer

Variable costing income is not affected by changes in production levels or inventory levels because it includes only the variable costs in the cost of goods sold. Since the question states that other costs and selling price are unchanged for 2017 and 2018, and the same number of units are sold in both years, the variable costing income will be the same in both years. Fixed manufacturing costs and changes in inventory levels affect absorption costing, not variable costing.

A Company with Fixed Manufacturing Costs of $500,000 Produces 100,000