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Valyn Corporation employs an absorption costing system for internal reporting purposes; however, the company is considering using variable costing. Data regarding Valyn's planned and actual operations for the calendar year are presented below.
The planned per unit cost figures shown in the above schedule were based on Valyn producing and selling 140,000 units. Valyn uses a predetermined manufacturing overhead rate for applying manufacturing overhead to its product; thus, a combined manufacturing overhead rate of $9.00 per unit was employed for absorption costing purposes. Any over- or underapplied manufacturing overhead is closed to the Cost of Goods Sold account at the end of the reporting year. The beginning finished goods inventory for absorption costing purposes was valued at the previous year's planned unit manufacturing cost, which was the same as the current year's planned unit manufacturing cost. There are no work-in-process inventories at either the beginning or the end of the year. The planned and actual unit selling price for the current year was $70.00 per unit. Valyn Corporation's absorption costing operating income wassA. Lower than variable costing operating income because actual production was less than planned production. B. Lower than variable costing operating income because actual production exceeded actual sales. C. Higher than variable costing operating income because actual production exceeded actual sales. D. Lower than variable costing operating income because actual sales were less than planned sales. |