Amanufacturer reports the following information below for its first three years in operation. year 1 year 2 year 3 income under variable costing $ 76,000 $ 109,000 $ 115,000 beginning inventory (units) 0 800 500 ending inventory (units) 800 500 0 fixed manufacturing overhead per unit $ 8.00 $ 8.00 $ 8.00 income for year 3 using absorption costing is:

111,000

Explanation:

The diference between variable and absorption is that the overhead is capitalize in the inventory under absorption, while for variable is cost of the period.

This means the ending and beginning inventory units have overhead cost which generates a diference with the variable costying.

The ending units will increase the absorption cost net income (because less overhead cost is recognize)

And the beginning units will decrease the net income (overhead cost from previous period are added into the current income statment.

having this in mind we proceed:

variable income - B inventory * overhead + E inventory * overhead

Year 1: 76,000 + 800 ending * 8 overhad =  82,400

Year 2: 109,000 - 800 beginning *8 + 500 ending * 8 =  106,600

Year 3: 115,000 - 500 beginning * 8 = 111,000