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Question
Vision Tester, Inc., a manufacturer of optical glass, began operations on February 1 of the current year. During this time, the company produced 900,000 units and sold 800,000 units at a sales price of $12 per unit. Cost information for this year is shown in the following table:Production costs
Direct materials $0.80 per unit
Direct labor $0.70 per unit
Variable overhead $500,000 in total
Fixed overhead $450,000 in total
Non-production costs
Variable selling and administrative $30,000 in total
Fixed selling and administrative $490,000 in total
Given this information, which of the following is true?
A. Net income under variable costing will exceed net income under absorption costing by $50,000.
B. Net income under absorption costing will exceed net income under variable costing by $50,000.
C. Net income will be the same under both absorption and variable costing.
D. Net income under variable costing will exceed net income under absorption costing by $60,000.
E. Net income under absorption costing will exceed net income under variable costing by $60,000.
Answer
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