The Following Table Shows Inventory Balances, in Units, for Years

question 21

Essay

The following table shows inventory balances, in units, for years 1, 2 and 3. Total fixed costs were $20,000 for each of the last three years. The units in year 1 beginning inventory were based on production of 500 units.
Required:

For each year, calculate the difference between absorption costing and variable costing operating income. Indicate which costing system has the highest income each year. Assume the LIFO method is used in year three.

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Definitions:

DSM-5

The Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition, is a standardized classification of mental disorders used by mental health professionals.

Clusters

Groups of similar objects, subjects, or events that are placed together based on certain criteria or characteristics.

Structured Interviews

An interview technique where every interviewed individual is asked a uniform set of questions, allowing for direct comparisons across different respondents.

Borderline Personality Disorder

A mental health disorder characterized by unstable moods, behavior, and relationships.