The level of inventory of a manufactured product has increased by 8,000 units during a period. The following data are also available:

Variable: Fixed:
Unit manufaacturing Costs of the period $24 $10
Unit operating expenses of the period $8 $3

What would be the effect on income from operations if absorption costing is used rather than variable costing?

a) $80,000 decrease
b) $80,000 increase
c) $88,000 increase
d) $104,000 increase

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The way to approach this problem is to first read the definitions of variable and absorption costing. What is the difference between the two? If you would like to do that and tell us what you think is the correct answer and why, we can review it for you and see if you are understanding. Thanks.