Problem:
Units produced $100,000.00
Units sold $95,000.00
Fixed manufacturing overhead $300,000.00
Direct materials per unit $55.00
Direct labor per unit $25.00
Variable manufacturing overhead per unit $15.00
A. Compute the cost per unit using absorption costing.
B. Compute the cost per unit using variable costing.
C. Compute the difference in net income between the two methods.
Which costing method results in the higher net income?
D. Assume that production was 80,000 units and sales were 100,000 units?
What would be the difference in net income between the two methods?
Which costing method shows the greater net income?
E. Assume the production was 100,000 units and sales were 100,000 units.
What would be the difference in net income between the two methods?
F. Which method is required by GAAP?