Prepare the income statement for the year ended 31 December 2020 using:Absorption costingVariable costing Additional information regarding the costs of the company are given:Manufacturing costsVariable cost per unitBudgeted fixed manufacturing overhead per year $32,400,000$25Selling and administrative costsVariable cost per unitTotal fixed cost$5$5,000,000Actual production in 2020Actual Sales in 20207,600,000 units7,000,000 units$50 per unit$32,000,000Selling priceActual fixed manufacturing overhead in 2020The practical capacity level is used to calculate the budgeted fixed manufacturing costper unit. There are no variable cost variances. Fixed manufacturing overhead costvariances are written off to cost of goods sold in the period in which they occur. Therehas been no beginning inventory in 2020.

Cost accounting is the method which is used to estimate cost incurred in the manufacturing of a…

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Prepare the income statement for the year ended 31 December 2020 using: Absorption costing Variable costing

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Question

Prepare the income statement for the year ended 31 December 2020 using:

Absorption costing
Variable costing

Additional information regarding the costs of the company are given:
Manufacturing costs
Variable cost per unit
Budgeted fixed manufacturing overhead per year $32,400,000
$25
Selling and administrative costs
Variable cost per unit
Total fixed cost
$5
$5,000,000
Actual production in 2020
Actual Sales in 2020
7,600,000 units
7,000,000 units
$50 per unit
$32,000,000
Selling price
Actual fixed manufacturing overhead in 2020
The practical capacity level is used to calculate the budgeted fixed manufacturing cost
per unit. There are no variable cost variances. Fixed manufacturing overhead cost
variances are written off to cost of goods sold in the period in which they occur. There
has been no beginning inventory in 2020.

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