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Clayton Company: Variable costing vs absorption costing

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4. 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:

A) under variable costing, the units in ending inventory will be costed at $3.20 each.

B) the net operating income under absorption costing for the year will be $480 lower than net operating income under variable costing.

C) the ending inventory under variable costing will be $480 lower than the ending inventory under absorption costing.

D) the net operating income under absorption costing for the year will be $800 lower than net operating income under variable costing.

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Solution Summary

Variable costing versus absorption costings for Clayton Company are examined. The solution is provided in an Excel spread sheet attached.

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See attached file for full calculations.

Correct choice of above four alternative answers is ...

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