Answer (D) is correct . The difference between absorption-basis and variable-basis operating income ($9,500 – $9,125 = $375) is equal to the change in inventory for the period (in units) multiplied by fixed manufacturing cost per unit. Stated another way, the difference in operating incomes divided by fixed per-unit manufacturing cost equals the change in ending inventory ($375?÷$1.50 = 250 units). Since 1,000 units were sold and ending inventory increased by 250 units, 1,250 units were produced (1,000 + 250).
Answer (A) is incorrect because The figure of 750 is the difference, not the sum, of units sold and ending inventory.
Answer (B) is incorrect because The figure of 925 results from using all fixed costs instead of only the fixed manufacturing costs and then subtracting the units sold rather than adding them.
Answer (C) is incorrect because The figure of 1,075 results from using all fixed costs instead of only the fixed manufacturing costs.
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May’s income using absorption costing was $9,500 The income for May, if variable costing had been used, would have been $9,125 The number of units Robinson produced during May was