Sproles Inc.manufactures a variety of products.Variable costing net operating income was $90,500 last year and its inventory decreased by 3,500 units.Fixed manufacturing overhead cost was $6 per unit.What was the absorption costing net operating income last year?
A)$90,500
B)$21,000
C)$69,500
D)$111,500

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. Here, 3,500 units x $6 = $21,000. So, $90,500 - $21,000 = $69,500.