Question:
(Net income; absorption vs. variable costing) Skillful Scanners produces commercial scanners. Throughout 2000, unit variable cost remained constant and fixed overhead was applied at the rate of $5 per unit. Income before tax using the variable costing method was $90,000 for July 2000. Beginning and ending inventories for July were 17,000 and 15,000 units, respectively.
a. Calculate income before tax under absorption costing assuming no variances.
b. Assume instead that the company's July beginning and ending inventories were 15,000 and 18,000 units, respectively. Calculate income before tax under absorption costing.