Answer:
Variable costing income from operations is less than absorption cost income from operations because under variable costing method, variable costs are considered as product cost and fixed costs are treated as period costs.
The difference in variable costing and absorption costing income from operations:
Production was 130,000 units
Sales were 125,000 units
Closing stock = 130,000 - 125,000 = 5,000
= Closing stock * Fixed cost per unit
= 5,000 * $50
= $250,000
a. The variable costing income from operations is less than absorption costing.
b. The difference in variable costing and absorption costing income from operations is $250,000.
a. Based on the information given the variable costing income from operations is less than absorption costing.
b. Difference in variable costing and absorption costing income from operations
Difference =( Production Quantity – Sales Quantity) x Fixed manufacturing cost per unit
Difference=(130,000 Units – 125,000 Units) x $50 per unit
Difference=5,000 units×$50 per unit
Difference=$250,000
Inconclusion the variable costing income from operations is less than absorption costing and the difference in variable costing and absorption costing income from operations is $250,000.
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