Bird's Eye View manufactures satellite dishes used in residential and commercial installations for satellite-broadcasted television. For each unit, the following costs apply: $50 for direct material, $100 for direct labor, and $60 for variable overhead. The company's annual fixed overhead cost is $750,000; it uses expected capacity of 12,500 units produced as the basis for applying fixed overhead to products. A connussuib if 10% of the selling price is paid on each unit sold. Annual Fixed Selling and Administrative expenses are $180,000.
The first column is 2010, second is 2011
- Selling price per unit $500 $500
- Number of units sold $10,000 $12,000
- Number of units produced 12,500 11,000
- Beginning Inventory (units) 7,500 10,000
- Ending Inventory (units) 10,000 ?
Prepare pre-tax income statements under absorption and variable costing for the years ending 2010, with any volume variance being charged to Cost of Good Sold. Reconcile the differences in income for the two methods.