A manufacturer reports the following information below for its first three years in operation. Income for year 3 using absorption costing is:
A) $109,000.
B) $117,000.
C) $106,600.
D) $115,000.
E) $111,000.

Question

A manufacturer reports the following information below for its first three years in operation.  Income for year 3 using absorption costing is:
A) $109,000. 
B) $117,000. 
C) $106,600. 
D) $115,000. 
E) $111,000.

Quizplus · Accepted Answer

Income under absorption costing = Income under variable costing − FOH beginning inventory + FOH ending inventory
Year 3:
$115,000 − (500 units × $8.00) + (0 units × $8.00) = $111,000

A Manufacturer Reports the Following Information Below for Its First