80,000 units
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Solutions Manual, Chapter 7 383
Case 7-18 (continued)
Given these data, the reconciliation would be:
July August September
Variable costing net operating in-
come (loss) ... $ (60,000) $ (10,000) $ 40,000
Deduct: Fixed manufacturing
overhead cost released from in-
ventory in July (5,000 units ×
$7 per unit)... (35,000)
Add: Fixed manufacturing over-
head cost deferred in inventory
in July (20,000 units × $7 per
unit) ... 140,000
ventory in August (20,000 units
× $7 per unit) ... (140,000)
in August (25,000 units × $7
per unit) ... 175,000
ventory in September (25,000
units × $7 per unit) ... (175,000)
in September (5,000 units × $7
per unit) ... 35,000
Absorption costing net operating
income (loss) ... $ 45,000 $ 25,000 $(100,000)
An alternate approach to the reconciliation would be as follows:
come (loss) ... $(60,000) $(10,000) $ 40,000
at the end of July (15,000 unit
increase × $7 per unit) ... 105,000
at the end of August (5,000 unit
increase × $7 per unit) ... 35,000
ventory during September
(20,000 unit decrease × $7 per
unit) ... (140,000)
income (loss) ... $ 45,000 $ 25,000 $(100,000)
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