Problem
Santana Rey expects sales of her line of computer workstation furniture to equal 300 workstations (at a sales price of $3,400) for 2014. The workstations' manufacturing costs include the following.
Direct materials $ 780 per unit
Direct labor $ 360 per unit
Variable overhead $ 60 per unit
Fixed overhead $ 19,200 per year
The selling expenses related to these workstations follow.
Variable selling expenses $ 30 per unit
Fixed selling expenses $ 3,200 per year
Santana is considering how many workstations to produce in 2016. She is confident that she will be able to sell any workstations in her 2016 ending inventory during 2017. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations.
Required:
1. Complete the following income statements using absorption costing.
2. Complete the following income statements using variable costing.