Question

Ming Company had net income of \(772,200 based on variable costing. Beginning and ending inventories were 7,800 units and 5,200 units, respectively. Assume the fixed overhead per unit was \)3.00 for both the beginning and ending inventory. What is net income under absorption costing?

Short answer

Net income under absorption costing is $764,400.

Step-by-step solution

Meaning of absorption costing

Absorption costing is one of the methods used in the cost accounting branch to determine the price of a product produced. It considers both direct and indirect expenses associated with the production of a product.

Computation of net income under absorption costing

Particulars	Amounts ($)
Net income under variable costing	$772,200
Less: Change in number of units in inventory (2600*3)	(7,800)
Net income under absorption costing	$764,400