Problem:
Clayton Company produces a single product. Last year, the company's variable production costs totaled $8,000 and its fixed manufacturing overhead costs totaled $4,800. The company produced 4,000 units during the year and sold 3,600 units. Assuming no units in the beginning inventory:
- Under variable costing, the units in ending inventory will be costed at $3.20 each.
- The net operating income under absorption costing for the year will be $480 lower than net operating income under variable costing.
- The ending inventory under variable costing will be $480 lower than the ending inventory under absorption costing.
- The net operating income under absorption costing for the year will be $800 lower than net operating income under variable costing.
Note: Be sure to show how you arrived at your answer.