Groovelex Inc.reports the following information for the year ended December 31,2014:
-The operating profit calculated using variable costing and absorption costing amounted to $9,270 and $11,250,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year 2014.
A)$10,230
B)$8,250
C)$20,750
D)$25,000

Question

Groovelex Inc.reports the following information for the year ended December 31,2014:  
-The operating profit calculated using variable costing and absorption costing amounted to $9,270 and $11,250,respectively.There were no beginning inventories.Determine the total fixed manufacturing overhead that will be expensed under absorption costing for the year 2014.
A)$10,230 
B)$8,250 
C)$20,750 
D)$25,000

Quizplus · Accepted Answer

The difference in operating profit between absorption costing and variable costing is due to the fixed manufacturing overhead included in inventory under absorption costing. The difference is $11,250 - $9,270 = $1,980. Since there were no beginning inventories, this difference represents the fixed manufacturing overhead expensed under absorption costing.