Problem - Adria Lopez expected sales of her line of computer workstation furniture to equal 300 workstations (at a sales price of $3,100) for 2014. The workstations' manufacturing costs include the following.
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Direct materials
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$730 per unit
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Direct labor
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$340 per unit
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Variable overhead
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$50 per unit
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Fixed overhead
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$24,000 per year
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The selling expenses related to these workstations follow.
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Variable selling expenses
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$40 per unit
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Fixed selling expenses
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$3,100 per year
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Adria is considering how many workstations to produce in 2014. She is confident that she will be able to sell any workstations in her 2014 ending inventory during 2015. However, Adria does not want to overproduce as she does not have sufficient storage space for many more workstations.
Required:
1. Complete the income statements using absorption costing.
2. Complete the income statements using variable costing.