Question:
Cutterski Corporation manufactures a propeller. Shown below is Cutterski's cost structure:
|
|
Variable
|
Total fixed
|
|
|
cost per
|
cost for the
|
|
|
propeller
|
year
|
|
Manufacturing cost
|
$114
|
$810,000
|
|
Selling and administrative
|
$20
|
$243,000
|
In its first year of operations, Cutterski produced 60,000 propellers but only sold 54,000.
Which costing method (variable or absorption) will generate a higher net operating income in Cutterski"s first year of operations and by how much?
A) variable by $81,000
B) variable by $108,000
C) absorption by $81,000
D) absorption by $108,000