Assignment: Profits SBU’s: Compairson of Variable and Full Costing
Harvard Company manufactures hair brushes that sell at wholesale for $2 per unit. The company had no beginning inventory in 2004. These data summarize the 2004 and 2005 operations.
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2004
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2005
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Sales
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1,800 Units
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2,200 Units
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Production:
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2,000 Units
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2,000 Units
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Production cost
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Factory - variable (per unit)
- fixed
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$.60
$1,000
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$.60
$1,000
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Marketing - variable
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$.40
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$.40
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Administrative - fixed
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$500
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$500
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Required: Prepare the following, using a spreadsheet system
1. An income statement for each year based on full costing
2. An income statement for each year based on variable costing
3. A reconciliation and explanation of the differences in the operating income resulting from using the full costing method and variable costing method.