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Pact Company had net income of $972,000 based on variable costing. Beginning and ending inventories were 7,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was $3.61 for both the beginning and ending inventory. What is net income under absorption costing?

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Answer:

$962,614

Explanation:

Under absorption costing, the net income is the variable costing net income deducted by the associated fixed costs of the units sold.

The number of units sold is:

[tex]S=7,800-5,200\\S=2,600[/tex]

Since the fixed overhead per unit was $3.61, the net income under absorption costing is:

[tex]N= \$972,000 - (2,600*\$3.61)\\N=\$962,614[/tex]

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