Impact of Absorption Costing and Variable Costing on ProfitQuestion: The following information is for Bullard Company, a producer of clock radios: Monthly budgeted production 10,000 units Sales price $25 per unit Variable manufacturing cost per unit Direct materials-$4Direct labour -$1Manufacturing overhead-$2 $7 per unit fixed manufacturing cost $40,000 each month,$4 per each units for 10,000units Variable selling & overhead cost fixed selling & overhead cost $3 per unit sold 20,000 each month Assume Bullard has no beginning goods inventory at the beginning of month 1. We will look at absorption costing versus variable costing for three different scenarios: Requirement :Prepare the income statements for Bullard Company using variable costing and absorption costing according to each scenario and answer the related question to each scenario SCENARIO-2 12,000 units produced is greater than 9,000 units sold Question: During month 2, Bullard Company produces 12,000 units but sells only 9,000 units. How does operating profit compare using absorption costing and variable costing when the number of units produced is greater than the number of units sold? SCENARIO-3: 8,000 units produced is less than 11,000 units soldQuestion: During month 3, Bullard Company produces 8,000 units but sells 11,000 units (3,000 units were left over from month 2 and therefore were in inventory at the beginning of month 3). How does operating profit compare using absorption costing and variable costing when the number of units produced is less than the number of units sold?
Impact of Absorption Costing and Variable Costing on Profit
Question: The following information is for Bullard Company, a producer of clock radios:
| Monthly budgeted production | 10,000 units |
| Sales price | $25 per unit |
|
Variable per unit Direct materials-$4 |
$7 per unit |
| fixed manufacturing cost | $40,000 each month,$4 per each units for 10,000 units |
| Variable selling & overhead cost fixed selling & overhead cost |
$3 per unit sold 20,000 each month |
Assume Bullard has no beginning goods inventory at the beginning of month 1. We will look at absorption costing versus variable costing for three different scenarios:
Requirement :Prepare the income statements for Bullard Company using variable costing and absorption costing according to each scenario and answer the related question to each scenario
SCENARIO-2 12,000 units produced is greater than 9,000 units sold
Question: During month 2, Bullard Company produces 12,000 units but sells only 9,000 units. How does operating profit compare using absorption costing and variable costing when the number of units produced is greater than the number of units sold?
SCENARIO-3: 8,000 units produced is less than 11,000 units sold
Question: During month 3, Bullard Company produces 8,000 units but sells 11,000 units (3,000 units were left over from month 2 and therefore were in inventory at the beginning of month 3). How does operating profit compare using absorption costing and variable costing when the number of units produced is less than the number of units sold?
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