company reported the following units of production and sales for june and july:\nmonth units produced…

company reported the following units of production and sales for june and july:\nmonth units produced sold\njune 100,000 90,000\njuly 100,000 105,000\nincome under absorption costing for june was $40,000; income under variable costing for july was $50,000. fixed costs were $600,000 for each month. there were no beginning inventories for june.\nhow much was the income (loss) for june using variable costing?\n(a) $20,000\n(b) $40,000\n(c) $(20,000)\n(d) $(40,000)\nlast saved 8:12:15 pm\nquestions filter (50)

company reported the following units of production and sales for june and july:\nmonth units produced sold\njune 100,000 90,000\njuly 100,000 105,000\nincome under absorption costing for june was $40,000; income under variable costing for july was $50,000. fixed costs were $600,000 for each month. there were no beginning inventories for june.\nhow much was the income (loss) for june using variable costing?\n(a) $20,000\n(b) $40,000\n(c) $(20,000)\n(d) $(40,000)\nlast saved 8:12:15 pm\nquestions filter (50)

Answer

Explanation:

Step1: Calculate fixed - cost per unit

Fixed costs per month are $600,000. In June, units produced are 100,000. Fixed - cost per unit = $\frac{Fixed\ costs}{Units\ produced}=\frac{600000}{100000}=6$.

Step2: Determine the difference in inventory level

In June, units produced are 100,000 and units sold are 90,000. The increase in inventory = Units produced - Units sold = 100000 - 90000 = 10000.

Step3: Calculate the difference between absorption costing and variable costing income

The difference between absorption costing and variable costing income is due to the fixed manufacturing overhead deferred in inventory under absorption costing. The fixed manufacturing overhead deferred in inventory = Fixed - cost per unit×Increase in inventory = 6×10000 = 60000. Since absorption costing income is higher than variable costing income when inventory increases. Income under absorption costing in June is $40,000. Income under variable costing = Income under absorption costing−Fixed manufacturing overhead deferred in inventory = 40000 - 60000=- 20000.

Answer:

C. $(20,000)