Last year, Tinklenberg Corporation's variable costing net operating income was $52,400 and its inventory decreased by 1,400 units. Fixed manufacturing overhead cost was $8 per unit for both units in beginning and in ending inventory. What was the absorption costing net operating income last year?
A) $41,200
B) $11,200
C) $63,600
D) $52,400

Question

Quizplus · Accepted Answer

When inventory decreases, absorption costing net operating income is lower than variable costing net operating income by the fixed manufacturing overhead cost per unit multiplied by the decrease in inventory units. Here, 1,400 units x $8 = $11,200. Thus, $52,400 - $11,200 = $41,200.

Last Year, Tinklenberg Corporation's Variable Costing Net Operating Income Was