Question

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?

a. $969,400
b. $925,077
c. $962,614
d. $981,379
e. $1,018,923

Answer 1

c. $962,614

Step-by-step explanation:

Income under variable costing = $972,000

Opening and closing inventories = 7800 units and 5200 units

Fixed overhead per unit = $3.61

Net income under absorption costing = $972,000 - ($7,800-$5200)* $3.61

Net income under absorption costing = $972,000 - $9,386

Net income under absorption costing = $$962,614