Answer:
the absorption costing net operating income last year is $41,200
Explanation:
Absorption Costing Net Operating Income for last year is determined by reconciling the Variable Costing Income to Absorption Costing Income.
Calculation of Absorption Costing Net Operating Income
Variable Costing Income $52,400
Less Decrease in Inventory ( 1,400 × $8) ($11,200)
Absorption Costing Net Operating Income $41,200
Absorption Costing Net Operating Income will be lower than Variable Costing Income.
Answer:
Net operating income under absorption costing = $41,300
Explanation:
The difference between variable costing and profit under absorption costing is simply the value of the change in inventory.
Usually, a decrease in inventory would cause profit under absorption costing to be lower . This is so because cost of goods sold would become higher leading to a lower profit
Difference in profit = POAR × change inventory
=$8 × 1,400 = $11,200
Absorption costing profit = Variable costing profit - Difference in profit
=$52,400 - $11,200
= $41,300
