Income Statement: It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period. Variable Costing: It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost. Absorption Costing: It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs. 1. To prepare: Income statement of the company for the year using variable costing Given, Selling price is $50 per unit. Direct Material is $5 per unit. Direct Labor is $14 per unit. Variable overhead is $2 per unit. Fixed Overhead is $900,000 in total. Variable selling and administration cost is $2.25 per unit. Fixed selling and administration cost is $350,000 in total. Number of units produced by the company is 100,000. Number of units sold by the company is 80,000. The income statement under variable costing is, T Company Income Statement (Variable Costing) Particulars Amount ($) Amount($) Sales ( 80 , 000 × $ 50 ) 4,000,000 Direct Materials ( 80 , 000 × $ 5 ) (400,000) Direct Labor ( 80 , 000 × $ 14 ) (1,120,000) Variable Production Overheads ( 80 , 000 × $ 2 ) (160,000) Variable Selling & Administrative Overheads ( 80 , 000 × $ 2.25 ) (180,000) (1,860,000) Contribution Margin 2,140,000 Fixed Production Overheads (900,000) Fixed Selling & Administrative Overheads (350,000) (1,250,000) Net Income 890,000 Table (1) Thus, the net income under variable costing is $890,000 .

Question

Want to see more full solutions like this?

Answer 1

Question

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

Wanting to finalize a sale before year-end, on December 29, WR Outfitters sold to Bob a warehouse and the land for $140,000. Note: Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount. a. What is Bob's basis in the warehouse and in the land if the appraised value of the warehouse was $100,750 and the appraised value of the land was $115,000? Bob's Basis Warehouse Land

On 17-Feb of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,302,500; $295,000 was allocated to the basis of the land and the remaining $1,007,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount. e. What would be the depreciation for 2024, 2025, and 2026 if the property were nonresidential property purchased and placed in service 17-Feb, 2007 (assume the same original basis)? Depreciation Year Expense 2024 2025 2026

What percentage of RBC’s total assets is held in investments (at October 31, 2020 and 2019)? refer to the 2020 financial statements and accompanying notes of Royal Bank of Canada (RBC). Note that RBC also holds a significant loan portfolio. What is the business reason for holding loans versus securities? Comment on how the investments are classified and presented on the balance sheet. What percentage of total interest income comes from securities (2020 and 2019)? Are there any other lines on the income statement or in OCI) relating to the securities? What percentage of net income (include any relevant OCI items) relates to securities (2020 versus 2019)? Calculate an approximate return on the investments in securities.

Answer 2

Question

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.

Answer 6

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Answer 7

Chapter 6, Problem 2PSA

To determine

Income Statement:

It is also known as profit and loss statement. It refers to that financial statement that is made to show the net income or loss that a company or a business has made by the end of a particular period.

Variable Costing:

It refers to the method of product costing in which the price of the product is calculated considering only the variable or direct costs or the cost that happened to occurred due to the product only. It is also called as marginal costing as it takes marginal costs while calculating the product cost.

Absorption Costing:

It refers to the method of product costing in which the price of the product is calculated considering all the fixed as well as the variable or direct costs. The valuation of closing inventory in this method is consists of both fixed and variable costs.

1.

To prepare: Income statement of the company for the year using variable costing

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars Amount ($) Amount($)
Sales ( 80,000×$50 ) 4,000,000
Direct Materials ( 80,000×$5 ) (400,000)
Direct Labor ( 80,000×$14 ) (1,120,000)
Variable Production Overheads (80,000×$2) (160,000)
Variable Selling & Administrative Overheads (80,000×$2.25) (180,000) (1,860,000)
Contribution Margin 2,140,000
Fixed Production Overheads (900,000)
Fixed Selling & Administrative Overheads (350,000) (1,250,000)
Net Income 890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Answer 8

Expert Solution

Explanation of Solution

Given,
Selling price is $50 per unit.
Direct Material is $5 per unit.
Direct Labor is $14 per unit.
Variable overhead is $2 per unit.
Fixed Overhead is $900,000 in total.
Variable selling and administration cost is $2.25 per unit.
Fixed selling and administration cost is $350,000 in total.
Number of units produced by the company is 100,000.
Number of units sold by the company is 80,000.

The income statement under variable costing is,

T Company Income Statement (Variable Costing)
Particulars	Amount ($)	Amount($)
Sales ( 80,000×$50 )		4,000,000
Direct Materials ( 80,000×$5 )	(400,000)
Direct Labor ( 80,000×$14 )	(1,120,000)
Variable Production Overheads (80,000×$2)	(160,000)
Variable Selling & Administrative Overheads (80,000×$2.25)	(180,000)	(1,860,000)
Contribution Margin		2,140,000
Fixed Production Overheads	(900,000)
Fixed Selling & Administrative Overheads	(350,000)	(1,250,000)
Net Income		890,000
Table (1)

Thus, the net income under variable costing is $890,000.

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.

Answer 13

2.

To determine

To explain: The difference in income between the variable costing and absorption costing income statement.

Answer 14

2.

Expert Solution

Explanation of Solution

The income statement prepared under variable costing includes the costing of a product on only direct or variable cost, so, the valuation of the ending inventory is done only on variable cost and not on the fixed cost.
The income statement prepared under absorption costing includes the costing of a product on both fixed and variable costs, so, the valuation of the ending inventory is done on both the cost that is fixed and variable.
The difference in the value of the closing inventory creates the difference in the incomes under the absorption and variable method.
When the value of closing inventory becomes zero or same under both methods, the difference between their incomes becomes zero.

Thus, the difference in income between the variable costing and absorption costing is due to the difference in the value of closing inventory under both the methods.