Answer
Cause: 5000 units * \$20 in inventory = $100,000
Work Step by Step
The amount of the difference between the variable costing and absorption costing net operating incomes is explained as follows: Manufacturing overhead released from inventory = Fixed manufacturing overhead in ending inventory – Fixed manufacturing overhead in beginning inventory = (20 per unit × 5,000 units) − 0 = $100,000
Hence, we have Variable costing net operating loss + Net operating income under absorption costing = 36,000 + 64,000 = 100,000
