Carolina Catsup Company produces catsup, which it sells exclusively to fast-food restaurants in 5-gallon containers, which sell for $16 each and have the following variable costs:
- Direct material $5
- Direct labor $2
- Variable overhead $3
Budgeted fixed overhead in 20x0 was $300,000. Actual production of 5-gallon containers totaled 150,000 of which 125,000 were sold. The company incurred the following selling and administrative expenses:Fixed $50,000 for the year,Variable $1 per container sold
A. Compute the standard product cost per container of catsup under (1) absorption costing and (2) variable costing.
B. Prepare income statements for 20x0 using (1) absorption costing and (2) variable costing.
C. Reconcile the income reported under the two methods by listing the two key places where the income statements differ.