Problem:
1. The following data relate to Flores Company for the year ended December 31, 19x8:
|
Cost of production:
|
|
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Direct materials
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$168,000
|
|
Direct labor
|
252,000
|
|
Factory overhead:
|
|
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Variable
|
90,000
|
|
Fixed
|
180,000
|
|
Sales commission (variable)
|
44,000
|
|
Sales salaries (fixed)
|
46,000
|
|
General and administrative expenses (fixed)
|
62,000
|
|
Units produced
|
75,000 units
|
|
Units sold (@$18)
|
60,000
|
(a) Compute the amount of income before income taxes and ending inventory under (1) absorption costing and (2) direct costing.
(b) Reconcile the difference in income before taxes between the two methods.