Johnson Company Has the Following Information Available at the End

question 10

Multiple Choice

Johnson Company has the following information available at the end of the fiscal year:
$\begin{array}{ll}\text { Finished goods inventory, January 1, } 2015 & 12,000 \text { units } \\\text { Finished goods inventory, December 31, 2015 } & 14,000 \text { units } \\\text { Work in process inventory, January 1, 2015 } & 10,000 \text { units } \\\text { Work in process inventory, December 31, 2015 } & 11,000 \text { units } \\\text { Raw materials inventory, January 1, 2015 } & 1,000 \text { units } \\\text { Raw materials inventory, December 31, 2015 } & 5,000 \text { units }\\\text { Actual fixed overhead cost rate }&\$ 2.05 \text { per unit }\\\text { Actual variable overhead cost rate }&\$3.10 \text { per unit }\\\text { Budgeted fixed overhead cost rate }&\$ 2.00 \text { per unit }\\\text { Budgeted variable overhead cost rate }&\$3.00 \text { per unit }\\\end{array}$
Assume operating income under absorption costing is $100,000.What is the difference in operating income between absorption costing and variable costing?

• A) $2,000
• B) $4,000
• C) $6,000
• D) $10,000

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Definitions:

Gross Pay

The total amount earned by an employee before any deductions or taxes are taken out.

Medicare Tax

A federal tax that helps fund the Medicare program, which provides health insurance for individuals who are 65 years old and older or who meet other specific criteria.

Salaries Payable

An account on the balance sheet that represents the amount of unpaid wages owed to employees at the end of a reporting period.

Payroll Register

A payroll register is a detailed document that records all employees' payroll activities, including wages, salaries, deductions, and net pay for a specific period.