EXERCISE 7-9 (20 MINUTES)

2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH07 VARIBLE COSSTING TOOL FOR MANAGEMENT 2. - SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH07 VARIBLE COSSTING TOOL FOR MANAGEMENT
SOLUTIONS TO QUESTION MANAGERIAL ACCOUNTING CH07 VARIBLE COSSTING TOOL FOR MANAGEMENT

2. The reconciliation of absorption and variable costing follows:

Year 1 Year 2

Variable costing net operating income... $40,000 $150,000

Add: Fixed manufacturing overhead de-

ferred in inventory under absorption cost-

ing (5,000 units × $6 per unit) ... 30,000

Deduct: Fixed manufacturing overhead re-

leased from inventory under absorption

costing (5,000 units × $6 per unit) ... (30,000)

Problem 7-12 (60 minutes)