Question - Comparison of actual-costing method
The Rehe Company sells its razors at $3 per unit. The company uses a first-in, first-out actual costing system. A fixed manufacturing cost rate is computed at the end of each year by dividing the actual fixed manufacturing costs by the actual production units. The following data are related to the first two years of operation:
2011 2012
Sales 1,000 units 1,200 units
Production 1,400 units 1,000 units
Costs:
Variable manufacturing $700 $500
Fixed manufacturing 700 700
Variable operating (marketing) 1,000 1,200
Fixed operating (Marketing) 400 400
Prepare income statements based on absorption costing for each of the two years.