Question

Sims Company, a manufacturer of tablet computers, began operations on January 1, 2017. Its cost and sales information for this year follows Manufacturing costs Direct materials Direct labor Overhead costs for the year 35 per unit 55 per unit 2,000,000 8,000,000 Variable overhead Fixed overhead Selling and administrative costs for the year Variable Fixed 775,000 $5,000,000 Production and sales for the year Units produced Units sold Sales price per unit 100,000 units 70,000 units 350 per unit 1. Prepare an income statement for the year using variable costing 2. Prepare an income statement for the year using absorption costing 3. Under what circumstance(s) is reported income identical under both absorption costing and variable costing? Complete this question by entering your answers in the tabs below Required 1Required 2Required 3

Answer 1

Variable format of Income Statement shows variable and fixed cost separately.Fixed manufacturing cost is completely charged to units sold.

Absorption costing income statement do not categorize fixed and variable cost.It do not charged entire fixed manufacturing cost but allocate it to units sold.