Tsuchiya Corporation manufactures a variety of products.Last year,the company's variable costing net operating income was $57,500.Fixed manufacturing overhead costs deferred in inventory under absorption costing amounted to $35,400.What was the absorption costing net operating income last year?
A)$22,100
B)$35,400
C)$57,500
D)$92,900

Question

Quizplus · Accepted Answer

Absorption costing net operating income = Variable costing net operating income + (Fixed manufacturing overhead deferred in inventory under absorption costing - Fixed manufacturing overhead released from inventory under absorption costing)
The fixed manufacturing overhead released from inventory under absorption costing is the amount of fixed overhead included in the cost of goods sold, which is equal to the amount of fixed overhead deferred in inventory last year.
Fixed manufacturing overhead released from inventory under absorption costing = $35,400
Absorption costing net operating income = $57,500 + ($35,400 - $35,400) = $92,900. Therefore, the correct answer is D.

Tsuchiya Corporation Manufactures a Variety of Products