Atlantic company produces a single product. for the most recent year, the company's net operating income computed by the absorption costing method was $7,800 and it net operating income computed by the variable costing method was $10,500, the companys unit product cost was $15 under variable costing and $24 under aborption costing. if the ending inventory consisted of 1,460 units, how many units must have been in the beginning inventory?

A (5,250) sold at split-off

B 22,625 continue

C (10,400) sold at split-off

Explanation:

Result for further processing:

quantity ( further process price - raw price) less further processing cost

Product A

13,800 pounds x (29.5 - 24) - 81,150 = (5,250)

Product B

21,500 pounds (24.50 - 18) - 117,125 = 22,625

Product C

5,000 gallon ( 38.5 - 30) - 52,900 = (10,400)

We must understand that the join processing cost are already incurred (sunk) therefore, not relevant. We hould check if the further process increases or not the gross profit.

As B is the only which increase the gross profit we continue the processing. THe other product based on our cost structure are not viable