Routsong Company had the following sales and production data for the past four years: Selling price per unit,variable cost per unit,and total fixed cost are the same in each year.Which of the following statements is not correct?
A)Under variable costing,net operating income for Year 1 and Year 2 would be the same.
B)Because of the changes in production levels,under variable costing the unit product cost will change each year.
C)The total net operating income for all four years combined would be the same under variable and absorption costing.
D)Under absorption costing,net operating income in Year 4 would be less than the net operating income in Year 2.

Question

Routsong Company had the following sales and production data for the past four years:  Selling price per unit,variable cost per unit,and total fixed cost are the same in each year.Which of the following statements is not correct?
A)Under variable costing,net operating income for Year 1 and Year 2 would be the same. 
B)Because of the changes in production levels,under variable costing the unit product cost will change each year. 
C)The total net operating income for all four years combined would be the same under variable and absorption costing. 
D)Under absorption costing,net operating income in Year 4 would be less than the net operating income in Year 2.

Quizplus · Accepted Answer

Under variable costing, the unit product cost is calculated as the sum of variable manufacturing costs and variable selling and administrative expenses. Since the variable cost per unit and selling price per unit are the same in each year, the unit product cost will change each year due to the changes in production levels. All other statements are correct.

Routsong Company Had the Following Sales and Production Data for the Past