Assume absorption costing net income is $92000, ending inventory consists of 550 units, the variable overhead rate is $15 per unit, and the fixed overhead rate is $35 per unit. Determine the net income under variable costing.

Question

Business

Larissa Irwin

20 April, 02:12

Assume absorption costing net income is $92000, ending inventory consists of 550 units, the variable overhead rate is $15 per unit, and the fixed overhead rate is $35 per unit. Determine the net income under variable costing.

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Koen Salazar · Answer 1

Net income = $72,750

Explanation:

Giving the following information:

Assume absorption costing net income is $92000, ending inventory consists of 550 units, the variable overhead rate is $15 per unit, and the fixed overhead rate is $35 per unit.

Under the variable cost method, fixed overhead does not get allocated to unitary cost production.

To calculate the net income, we need to incorporate to the net income the fixed overhead cost of the ending inventory units:

Net income = 92,000 - (550*35) = $72,750