Last Year, Harris Company Manufactured 17,000 Units and Sold 13,000

question 87

Multiple Choice

Last year, Harris Company manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:
$\begin{array} { | l | r | } \hline \text { Direct materials } & \$ 153,000 \\\hline \text { Direct labour } & 110,500 \\\hline \text { Variable manufacturing overhead } & 204,000 \\\hline \text { Fixed manufacturing overhead } & 255,000 \\\hline\end{array}$ Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labour is a variable cost.


-Under variable costing,what was the company's operating income for the year,as compared with under absorption costing?

• A) $60,000 higher than under absorption costing.
• B) $108,000 higher than under absorption costing.
• C) $108,000 lower than under absorption costing.
• D) $60,000 lower than under absorption costing.

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