The Dorset Corporation produces and sells a single product. The following data refer to the year just completed: Beginning inventory 0 Units produced 9,000 Units sold 7,000 Selling price per unit $ 47 Selling and administrative expenses: Variable per unit $ 4 Fixed per year $ 58,000 Manufacturing costs: Direct materials cost per unit $ 10 Direct labor cost per unit $ 6 Variable manufacturing overhead cost per unit $ 5 Fixed manufacturing overhead per year $ 90,000 Assume that direct labor is a variable cost. Required: Prepare an income statement for the year using absorption costing Prepare an income statement for the year using variable costing Reconcile the absorption costing and variable costing net operating income figures
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed: Beginning inventory 0 Units produced 9,000 Units sold 7,000 Selling price per unit $ 47 Selling and administrative expenses: Variable per unit $ 4 Fixed per year $ 58,000 Manufacturing costs: Direct materials cost per unit $ 10 Direct labor cost per unit $ 6 Variable manufacturing overhead cost per unit $ 5 Fixed manufacturing overhead per year $ 90,000 Assume that direct labor is a variable cost. Required: Prepare an income statement for the year using absorption costing Prepare an income statement for the year using variable costing Reconcile the absorption costing and variable costing net operating income figures
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
The Dorset Corporation produces and sells a single product. The following data refer to the year just completed:
|
Beginning inventory |
|
0 |
|
Units produced |
|
9,000 |
|
Units sold |
|
7,000 |
|
Selling price per unit |
$ |
47 |
|
Selling and administrative expenses: |
|
|
|
Variable per unit |
$ |
4 |
|
Fixed per year |
$ |
58,000 |
|
|
|
|
|
Direct materials cost per unit |
$ |
10 |
|
Direct labor cost per unit |
$ |
6 |
|
Variable manufacturing |
$ |
5 |
|
Fixed manufacturing overhead per year |
$ |
90,000 |
Assume that direct labor is a variable cost.
Required:
- Prepare an income statement for the year using absorption costing
- Prepare an income statement for the year using variable costing
- Reconcile the absorption costing and variable costing net operating income figures
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