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Kluber, Inc. had net income of $911,000 based on variable costing. Beginning and ending inventories were 56,100 units and 54,200 units, respectively. Assume the fixed overhead per unit was $1.80 for both the beginning and ending inventory. What is net income under absorption costing?

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Answer: $907,580

Explanation:

Under Absorption Costing you remove the opening fixed cost balance and add the ending fixed cost balance to find out the net income in this manner,

Net Income under Variable Costing = $911,000

Opening Fixed Overhead Cost

= 1.8 x 56,100

= $100,980

Closing Fixed Overhead Cost

= 1.8 x 54,200

= $97,560

= 911,000 - 100,980 + 97,560

= $907,580

This is the income under Absorption Costing.

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