Answer :
Answer:
VARIABLE COSTING
sales revenue 3,910,000 (23,000 X 170)
variable cost (1,058,000) (23,000 X 46)
contribution margin 2,852,000
fixed overhead 858,000
fixed S&A 895,000
NET INCOME 1,099,000
ABSORPTION COSTING
sales revenue 3,910,000
COGS (1,564,000) (23,000 X 68)
Gross profit 2,346,000
S&A
variable 92,000
fixed 895,000
net income 1,359,000
The difference arise as the fixed manufacturing cost are posted entirely in the variable cost while only a portion for the absorption cost:
26 dollar per unit time 10,000 units in inventory with capitalized fixed cost
260,000
difference in operating income:
1,359,000 - 1,099,000 = 260,000
Explanation:
variable costing will add up the variable cost per unit and multiply by the 23000 unit sold:
Selling & Adminsitrative 4
materials 23
labor 15
variable manufacturing 4
the fixed cost will be posted entirely.
absorption will distribute the manufacturing fixed cost among the produced units:
858,000 / 33,000 = 26 dollar per unit
total cost per unit:
26 fixed + 23 materials + labor 15 + variable 4 = 68
The difference arise as the fixed manufacturing cost are posted entirely in the variable cost while only a portion for the absorption cost:
26 dollar per unit time 10,000 units in inventory with capitalized fixed cost
260,000
difference in operating income:
1,359,000 - 1,099,000 = 260,000
NOTE attached missing information
