Exercise 19-7 (Algo) Income reporting under absorption costing and variable costing LO P2Sims Company began operations on January 1. Its cost and sales information for this year follow. Direct materials$ 40per unitDirect labor$ 60per unitVariable overhead$ 40per unitFixed overhead$ 6,300,000per yearVariable selling and administrative expenses$ 11per unitFixed selling and administrative expenses$ 5,000,000per yearUnits produced105,000unitsUnits sold75,000unitsSales price$ 350per unit 1. Prepare an income statement for the year using variable costing.2. Prepare an income statement for the year using absorption costing.

An income statement is a financial report that indicates the revenue and expenses of a business. It…

Answered: Exercise 19-7 (Algo) Income reporting…

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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Exercise 19-7 (Algo) Income reporting under absorption costing and variable costing LO P2

Sims Company began operations on January 1. Its cost and sales information for this year follow.

Direct materials	$ 40	per unit
Direct labor	$ 60	per unit
Variable overhead	$ 40	per unit
Fixed overhead	$ 6,300,000	per year
Variable selling and administrative expenses	$ 11	per unit
Fixed selling and administrative expenses	$ 5,000,000	per year
Units produced	105,000	units
Units sold	75,000	units
Sales price	$ 350	per unit

1. Prepare an income statement for the year using variable costing.
2. Prepare an income statement for the year using absorption costing.

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