Mortech Company had net income of $250,000 based on variable costing. Beginning and ending inventories were 50,000 units and 48,000 units, respectively. Assume the fixed overhead per unit was $0.75 for both the beginning and ending inventory. What is net income under absorption costing?

Net income under absorption costing would be $ 250,000

Explanation:

Mortech Company

Net Income variable costing $250,000

Variable Costing Absorption Costing

Sales Sales

Less Variable Costs Less Product Costs (Variable + Fixed)

Contribution Margin Gross Profit

Less Fixed Costs Less Period Costs (Variable + fixed)

Net Profit Net Profit

Net income under both the methods remains the same unless there is a difference in fixed costs for certain items.