Ramon Company reported the following units of production and sales for June and July:
Income under absorption costing for June was $40,000; income under variable costing for July was $50,000. Fixed costs were $600,000 for each month.
-Refer to Figure 8-7. How much was income for June using variable costing?
A) $40,000
B) $20,000
C) $(40,000)
D) $(20,000)

Question

Ramon Company reported the following units of production and sales for June and July:
  Income under absorption costing for June was $40,000; income under variable costing for July was $50,000. Fixed costs were $600,000 for each month.
-Refer to Figure 8-7. How much was income for June using variable costing?
A) $40,000 
B) $20,000 
C) $(40,000) 
D) $(20,000)

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing costs are treated as period expenses and are not included in inventory costs. Therefore, the income under variable costing for June would be the same as under absorption costing, which is $40,000. Therefore, the answer is D) $(20,000), as this is not a valid option.

Ramon Company Reported the Following Units of Production and Sales