Hasselback, Inc., produced 175,000 units and prepared the following income report using absorption costing (numbers in $1,000s):
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Sales (100,000 Units)
|
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$15,000
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Less Cost of Goods Sold
|
|
|
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Direct Materials
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$1,200
|
|
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Direct Labor
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300
|
|
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Unit-related overhead
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900
|
|
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Other overhead
|
4,000
|
6,400
|
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Gross Margin
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8,600
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Less other operating costs
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|
|
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Variable Selling & Administrative
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600
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Fixed Selling & Administrative
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2,000
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Profit
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$6,000
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Required:
1. Determine Hasselback's profit using unit-variable costing.
2. Determine Hasselback's profit using throughput costing.
3. Which method do you think presents the most reliable picture of current earnings? Why?