Question

Please assist in solving 2 part problem attached.

Question/Problem is listed under
"required"
1. prepare an income statement for current year under variable costing
2. fill in blanks

See 3 attachments attached

Answer 1

Solution:

Kenji kayaking

Variable costing income statement:

Sales		$840,000
Less: Variable cost
Variable product cost	$240,000($300 × 800 units)
Variable selling and administrative expenses	$105,000($100 ×1050 units)
Total variable costs		$345,000
Contribution margin		$495,000
Less: Fixed expenses
Fixed overhead costs	$105,000
Fixed selling and administrative costs	$125,000
Total fixed expenses		$230,000
Net income (loss)		$265,000
Net income under absorption costing is higher than net income under variable costing by:		$25,000
Number of units added to (subtracted from) inventory		250 (1050 units - 800 units)
		$100
Fixed costs added to inventory		$25,000 ($100 ×250)