Entel Corporation creates an accounting computer program. This year, Entel Corporation produced 20,000 units of their program and sold 22,000 units. Each unit sells for $250. Selected operational and financial data are shown below.
Variable costs per unit:
Direct materials .......$ 15.00
Direct labor ......... 40.00
Manufacturing overhead .... 5.00
Selling and administrative ... 2.00
Fixed costs per unit:
Manufacturing overhead ...$200,000
Selling and administrative ... $150,000
A. Calculate Entel’s net income using absorption costing.
B. Will income be higher or lower if calculated using variable costing?
C. By how much?