The company is considering using either super-variable costing or a variable costing system that assigns $14 of direct labor cost to each unit that is produced. Which of the following statements is true regarding the net operating income in the first year?
A)Super-variable costing net operating income exceeds variable costing net operating income by $98,000.
B)Variable costing net operating income exceeds super-variable costing net operating income by $98,000.
C)Super-variable costing net operating income exceeds variable costing net operating income by $448,000.
D)Variable costing net operating income exceeds super-variable costing net operating income by $448,000.

Question

Quizplus · Accepted Answer

Under variable costing, fixed manufacturing overhead is expensed in the period incurred, while under super-variable costing, it is not included in product costs. This results in higher net operating income under variable costing when inventory levels increase, as fixed costs are not deferred in inventory.

The Company Is Considering Using Either Super-Variable Costing or a Variable