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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 Preview

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    Correct choice of above four alternative answers is ...

    Solution Summary

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

    $2.19

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