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Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold?

Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold?

FINANCIAL ACCOUNTING
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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Santana Rey expects sales of Business Solutions' line of computer workstation furniture to equal 300 workstations (at a sales price of $3,400 each) for 2021. The workstations' manufacturing costs include the following. Direct materials $ 740 per unit Direct labor $ 330 Variable overhead $90 Fixed overhead $ 28,800 per year per unit per unit per unit Selling and administrative expenses for these workstations follow. Variable $30 Fixed $ 3,400 per year Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her 2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold?
Transcribed Image Text:Santana Rey expects sales of Business Solutions' line of computer workstation furniture to equal 300 workstations (at a sales price of $3,400 each) for 2021. The workstations' manufacturing costs include the following. Direct materials $ 740 per unit Direct labor $ 330 Variable overhead $90 Fixed overhead $ 28,800 per year per unit per unit per unit Selling and administrative expenses for these workstations follow. Variable $30 Fixed $ 3,400 per year Santana is considering how many workstations to produce in 2021. She is confident that she will be able to sell any workstations in her 2021 ending inventory during 2022. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing. 2. Complete the following income statements using variable costing. 3. Which costing method, absorption or variable, yields the higher income when 320 workstations are produced and 300 are sold?
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