Analyzing Income under Absorption and Variable Costing

Variable manufacturing costs are $$72$ per unit, and fixed manufacturing costs are $$156,600.$ Sales are estimated to be $7,500$ units. If an amount is zero, enter $"0".$ Round intermediate calculations to the nearest cent and your final answers to the nearest dollar.

a$.$ How much would absorption costing operating income differ between a plan to produce $7,500$ units and a plan to produce $8,700$ units?

b$.$ How much would variable costing operating income differ between the two production plans?

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a$.$ Remember that under absorption costing, fixed manufacturing costs are allocated to the units produced. Therefore, the change in inventory units times the difference in the per unit fixed cost at the two production levels is the difference in income between the two production levels.

b$.$ Remember that since all fixed manufacturing costs are treated as period expenses under variable costing, there are no differences in income between the two plans.