What is net income under variable costing, Accounting Basics

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What is net income under variable costing

CD New is a direct marketer of popular music. The following information about its revenue and cost structure is available:

Selling price $13.00 per CD
Variable Costs:
Direct Materials $ 1.00
Direct Labor 1.25
Variable Overhead .75
Selling and Admin 1.00
Fixed Costs:
Overhead $1,000,000 per year
Selling and Admin $3,000,000 per year

Assume that 500,000 CDs are produced and 450,000 are sold in 2010.

Required:
a) What is net income under Variable Costing?
b) What is net income under Absorption Costing?
c) What is ending inventory under Variable Costing?
d) What is ending inventory under Absorption Costing?

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Accounting Basics: What is net income under variable costing

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Accounting Basics: What is net income under variable costing

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