Computing the operating income under variable costing and absorption costing method.
Below is presented information regarding the production process of a Manufacturing Co. for a two month period.
|
|
Month 1
|
Month 2
|
|
Beginning inventory in units
|
0
|
200
|
|
Units Produced
|
1,000
|
1,000
|
|
Units Sold
|
800
|
1,200
|
|
Sales
|
$200,000
|
$240,000
|
|
Material Costs
|
$50,000
|
$50,000
|
|
Variable Conversion costs used
|
$20,000
|
$20,000
|
|
Indirect Conversion costs
|
$7,800
|
$7,800
|
|
Indirect Operating costs
|
$20,000
|
$20,000
|
Required:
Evaluate the operating income under variable costing and absorption costing for each month.