Managerial Accounting

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Variable vs Absorption Costing Methods


Ramsfield Co had the following data for the last four years:

Data in units
year 1 2 3 4
sales 5,000 9,000 5,000 4,500
production 6,000 9,000 4,000 5,000

Fixed manufacturing overhead annually (each of the four years) \$90,000
There were no beginning inventory in Year 1.

In Year 1, what is the dollar amount of the difference in ending inventory between absorption and variable costing methods?

Absorption costing method ending inventory is

than variable costing method by