Question:
Stonehenge Inc., a manufacturer of landscaping blocks, began operations on April 1 of the current year. During this time, the company produced 750,000 units and sold 720,000 units at a sales price of $9 per unit. Cost information for this period is shown below:
|
Production costs:
|
|
Direct labor
|
$.30 per unit
|
|
Direct materials
|
$1.80 per unit
|
|
Variable overhead
|
$495,000
|
|
Fixed overhead
|
$450,000
|
|
Non-production costs:
|
|
Variable selling expense
|
$18,000
|
|
Fixed administrative expenses
|
$53,000
|
Required:
a) Prepare Stonehenge"s income statement under absorption costing.
b) Prepare Stonehenge"s income statement under variable costing.
c) Reconcile the two net incomes.