Answer the following questions using the information below:
Queanbeyan Company incurred fixed manufacturing costs of $7200 during 2018.Other information for 2018 includes:
The budgeted denominator level is 800 units.
Units produced total 1000 units.
Units sold total 950 units.
Beginning inventory was zero.
The fixed manufacturing cost rate is based on the budgeted denominator level.Manufacturing variances are closed to cost of goods sold.
-Operating profit using absorption costing will be ________ operating profit if using variable costing.
A)$450 higher than
B)$1350 lower than
C)the same as
D)$900 higher than

Question

Quizplus · Accepted Answer

Under absorption costing, fixed manufacturing costs are spread over the units produced, so the cost per unit is lower when more units are produced than the budgeted denominator level. Since 1000 units were produced but only 950 were sold, some fixed costs remain in inventory under absorption costing, leading to a $450 higher operating profit compared to variable costing, where all fixed costs are expensed in the period incurred.

Answer the Following Questions Using the Information Below