Explain the meaning of internal transaction with example.

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ABC Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below: Particulars Units in beginning inventory Units produced Amount 0 9,000 Units sold 7,000 Sales 1,00,000 Less: Cost of goods sold: Beginning inventory Add: Cost of goods manufactured 54,000 Goods available for sale 54,000 Less: Ending inventory 12,000 Cost of goods sold 42,000 Gross margin 58,000 Less: Selling and administrative expenses 28,000 Net operating income 30,000 Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold Required: Prepare a new income statement for the year using variable costing.

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Chapter 4, Problem 7DQ

To determine

Explain the meaning of internal transaction with example.

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ABC Company produces a single product. Operating data for the company and its absorption costing income statement for the last year are presented below: Particulars Units in beginning inventory Units produced Amount 0 9,000 Units sold 7,000 Sales 1,00,000 Less: Cost of goods sold: Beginning inventory Add: Cost of goods manufactured 54,000 Goods available for sale 54,000 Less: Ending inventory 12,000 Cost of goods sold 42,000 Gross margin 58,000 Less: Selling and administrative expenses 28,000 Net operating income 30,000 Variable manufacturing costs are $4 per unit. Fixed manufacturing overhead totals $18,000 for the year. The fixed manufacturing overhead was applied at a rate of $2 per unit. Variable selling and administrative expenses were $1 per unit sold Required: Prepare a new income statement for the year using variable costing.

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