Problem:
Bruster Company sells its products for $66 each. The current production level is 25,000 units, although only 20,000 units are anticipated to be sold.
Unit manufacturing costs are:
Direct materials $12.00
Direct manufacturing labor $18.00
Variable manufacturing costs $9.00
Total fixed manufacturing costs $180,000
Marketing expenses $6.00 per unit, plus $60,000 per year
Required:
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.
Absorption:
Revenues $1,320,000
Cost of goods sold:
Beginning Inventory $-
Variable manufacturing costs $225,000
Allocated fixed manufacturing costs $180,000
Cost of goods available for sale $405,000
Less: Ending inventory $(330,000)
Adjustment for production-voulme variance $-
Cost of goods sold: $75,000
Gorss margin $1,245,000
Operating costs:
Variable operating costs $225,000
Fixed operating costs $210,000
Total operating costs
Operating income