Gumby s Gum produces large amounts of gum each year This
Gumby’s Gum produces large amounts of gum each year. This year, Gumby’s produced 45,000 packs of gum but only sold 42,000 of the packs. Each pack sells for $1.50. Selected operational and financial data are shown below.
Variable costs per unit:
Production ......... $ .50
S&A ............ .10
Fixed costs in total:
Production ......... $6,000
S&A .......... $3,000

Required
A. Calculate Gumby’s net income using variable costing.
B. Will income be higher or lower if calculated using absorption costing?
C. By how much?

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