1. Cabaret Corporation produces a single product. Data concerning the company's operations last year appear below: Units in beginning inventory... Units produced. Units sold.......... Selling price per unit...... Variable costs per unit: Direct materials. Direct labor...... Variable manufacturing overhead.. Variable selling and administrative.... Fixed costs in total: Fixed manufacturing overhead.... Fixed selling and administrative.. Assume direct labor is a variable cost. 10,000 9,000 $60 $15 $5 $2 $4 $200,00 0 $70,000 Required: a. Compute the unit product cost under both absorption and variable costing. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. d. Prepare a report reconciling the difference in net operating income between absorption and variable costing for the year.

1. Cabaret Corporation produces a single product. Data concerning the company's operations last year appear below: Units in beginning inventory... Units produced. Units sold.......... Selling price per unit...... Variable costs per unit: Direct materials. Direct labor...... Variable manufacturing overhead.. Variable selling and administrative.... Fixed costs in total: Fixed manufacturing overhead.... Fixed selling and administrative.. Assume direct labor is a variable cost. 10,000 9,000 $60 $15 $5 $2 $4 $200,00 0 $70,000 Required: a. Compute the unit product cost under both absorption and variable costing. b. Prepare an income statement for the year using absorption costing. c. Prepare an income statement for the year using variable costing. d. Prepare a report reconciling the difference in net operating income between absorption and variable costing for the year.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Income Statements under Absorption Costing and Variable Costing Fresno Industries Inc. manufactures and sells high-quality camping tents. The company began operations on January 1 and operated at 100% of capacity (70,400 units) during the first month, creating an ending inventory of 6,400 units. During February, the company produced 64,000 units during the month but sold 70,400 units at $90 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Manufacturing costs in February 1 beginning inventory: Variable Fixed Total Manufacturing costs in February: Variable Fixed Total Selling and administrative expenses in February: Variable Fixed Total Number of Units Cost of goods sold: 6,400 $36.00 6,400 14.00 64,000 64,000 Unit Cost 70,400 70,400 Total Cost $230,400 89,600 $50.00 $320,000 $36.00 $2,304,000 15.40 985,600 $51.40 $3,289,600 $18.20 $1,281,280 7.00 492,800 $25.20 $1,774,080 a. Prepare an income statement according to the absorption…
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