Last year, Tinklenberg Corporation's variable costing net operating income was $52,400 and its inventory decreased by 1,400 unit

Answer:

the absorption costing net operating income from the previous year was $41,200

Explanation:

The Absorption Costing Net Operating Income for the last year is calculated by reconciling the Variable Costing Income to the Absorption Costing Income.

Calculation of Absorption Costing Net Operating Income

Variable Costing Income                                             $52,400

Less Decrease in Inventory ( 1,400 × $8)                   ($11,200)  

Absorption Costing Net Operating Income               $41,200

Absorption Costing Net Operating Income will be lower than Variable Costing Income.

Answer:

Net operating income under absorption costing = $41,300

Explanation:

The disparity between variable costing and profit under absorption costing is simply attributed to the change in inventory value.

Typically, a reduction in inventory results in lower profits under absorption costing. This occurs because the cost of goods sold increases, reducing profit overall.

Difference in profit = POAR × change in inventory

                               =$8 × 1,400 = $11,200

Absorption costing profit = Variable costing profit - Difference in profit

               =$52,400 - $11,200

              = $41,300