A company manufactures a single product. During year 2012, a total of 20,000 units of this product were produced and 15,000 units were sold. The sales price was $20.00 per unit.
Cost data from the controller include the following:
Variable product cost per unit $6.00
Variable selling cost per unit 2.00
Fixed product costs (total) $50,000
Fixed selling costs 30,000
A. The difference in income reported by the company can be $12,500, depending on the method used to determine cost of goods sold and final inventory values. Why? Please explain in the space provided.
B. What is the net income under the absorption costing method?
C. What is the net income under the variable costing method?
D. What is the dollar value of the ending inventory under absorption costing?
E. What is the dollar value of the ending inventory under the variable costing method?