Chapter 6, Problem 13PB

Submarine Company produces only one product and sells that product for $150 per unit. Cost information for the product is as follows:

Selling expenses are $2 per unit and are all variable. Administrative expenses of $15,000 are all fixed, Submarine produced 2.000 units and sold 1.800. Grainger had no beginning inventory.

A. Compute net income under

1. absorption costing
2. variable costing

B. Reconcile the difference between the income under absorption and variable costing.