Schrick Inc. manufactures a variety of products. Variable costing net operating income was $86,800 last year and ending inventory increased by 1,900 units. Fixed manufacturing overhead cost was $6 per unit. What was the absorption costing net operating income last year?
A) $86,800
B) $75,400
C) $98,200
D) $11,400

Question

Quizplus · Accepted Answer

To calculate the absorption costing net operating income, we need to add the fixed manufacturing overhead cost per unit (given as $6) to the variable cost per unit. As the ending inventory increased by 1,900 units, we need to multiply the fixed manufacturing overhead cost by the increase in inventory (1,900 units x $6 per unit).

Absorption costing net operating income = Variable costing net operating income + (Ending inventory increase x Fixed manufacturing overhead cost per unit)
= $86,800 + (1,900 x $6)
= $98,200

Therefore, the best choice is C as it provides the correct absorption costing net operating income.