1. Prepare an income statement for the company using variable costing.
2. Prepare an income statement for the company using absorbtion costing
3. Under what circumstances reported income identical under both absorption costing and variable costing?
|
Sims Company, a manufacturer of in-home decorative fountains, began operations on September 1 of the current year. Its cost and sales information for this year follows.
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|
|
|
|
| Production costs |
|
|
|
| Direct materials |
$ |
40 |
per unit |
| Direct labor |
$ |
60 |
per unit |
| Overhead costs for the year |
|
|
|
| Variable overhead |
$ |
3,150,000 |
|
| Fixed overhead |
$ |
7,350,000 |
|
| Nonproduction costs for the year |
|
|
|
| Variable selling and administrative |
$ |
725,000 |
|
| Fixed selling and administrative |
$ |
4,750,000 |
|
| Production and sales for the year |
|
|
|
| Units produced |
|
105,000 |
units |
| Units sold |
|
75,000 |
units |
| Sales price per unit |
$ |
360 |
per unit |