Reference no: EM131774456

Problem - Absorption vs. variable costing) Reese's Tot Toy Boxes uses variable costing to manage its internal operations. The following data relate to the company's first year of operation, when 25,000 units were produced and 21,000 units were sold.

Variable costs per unit

Direct material $50

Direct labor 30

Variable overhead 14

Variable selling costs 12

Fixed costs

Selling and administrative $750,000

Manufacturing 500,000

How much higher (or lower) would the company's first-year net income have been if absorption costing had been used rather than variable costing? Show computations.