Problem - Loker Corp. makes and sells garden hoses in 50 ft. lengths. The following information is available for the year just ended, the company's first year of operations:
Units produced: 8,000
Variable costs per unit:
Units sold: 6,000
Manufacturing (Direct Materials, Direct Labor, and Variable Overhead) - $12.00 (total)
Selling and Admin. - $2.00
Selling price: $25.00 per unit
Total fixed costs:
Overhead - $7,200
Selling and Admin.- $5,000
REQUIRED -
1. Compute the cost of one unit of product using absorption costing.
2. Compute the cost of one unit of product using variable costing.
3. Prepare an income statement for the year in the proper format using absorption costing.
4. Prepare an income statement for the year in the proper format using variable costing.
5. Provide a quantitative explanation/reconciliation of why the two net income amounts that you calculated above are different (or the same).