During 2025, inventory increased by 7,000 units. The following information for the company is available: If the company uses absorption costing rather than variable costing, the effect on operating income would be a
A)$42,000 decrease.
B)$42,000 increase.
C)$52,500 increase.
D)$52,500 decrease.

Question

During 2025, inventory increased by 7,000 units. The following information for the company is available:  If the company uses absorption costing rather than variable costing, the effect on operating income would be a
A)$42,000 decrease. 
B)$42,000 increase. 
C)$52,500 increase. 
D)$52,500 decrease.

Quizplus · Accepted Answer

($12 - $6) x 7,000 = $42,000
(V manufacturing costs - F manufacturing costs) x increase in inventory

During 2025, Inventory Increased by 7,000 Units