Y Company Reported Operating Income for Year 2 of $1,600,000

question 91

Essay

Y Company reported operating income for Year 2 of $1,600,000 under variable costing and $1,200,000 under absorption costing.The total variable manufacturing cost of the company's beginning finished goods inventory was $120,000.The cost of the company's end-of-year finished goods inventory under standard absorption costing was $50,000 higher than the cost of the beginning-of-year finished goods inventory under variable costing.
Required:
a)Calculate the cost of ending finished goods inventory under absorption costing.
b)Compare the operating incomes under absorption costing and variable costing.What do the numbers suggest in terms of relationship,if any,between units sold and units produced in Year 2? Explain.

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Definitions:

Industrial Societies

Societies characterized by the large-scale production of goods through mechanized and technological processes, often associated with urbanization and changes in social structures.

Booker T. Washington

An influential African American educator, author, and orator in the late 19th and early 20th centuries, who advocated for the economic and academic uplift of Black people.

W.E.B. Du Bois

An influential African-American sociologist, historian, and civil rights activist known for his leadership in the Niagara Movement and co-founding the NAACP.

Progressive

Relating to or advocating progress, change, or reform, especially in social or political matters.