Variable and Absorption Costing Method
Salvador Corporation began operations in January. The company produced 10,000 units and sold 8,000 units in its first year of operations. Costs for the year were as follows:
Fixed Manufacturing Costs 250,000
Variable Manufacturing Costs 180,000
Fixed Selling and Administrative Costs 75,000
Variable selling and administrative Costs 80,000
How would the net income of Salvador compare between variable and absorption costing methods?
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Sims Company, a manufacturer of tablet computers, began
operations on January 1, 2019. Its cost and sales information for
this year follows.
Manufacturing costs
Direct materials
$
30
per unit
Direct labor
$
50
per unit
Overhead costs
Variable
$
20
per unit
Fixed
$
8,400,000
(per year)
Selling and administrative costs for the year
Variable
$
725,000
Fixed
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Exercise 06-3 Income reporting under absorption costing and
variable costing LO P2
Sims Company, a manufacturer of tablet computers, began
operations on January 1, 2019. Its cost and sales information for
this year follows.
Manufacturing costs
Direct materials
$
30
per unit
Direct labor
$
50
per unit
Overhead costs
Variable
$
20
per unit
Fixed
$
8,400,000
(per year)
Selling and administrative costs for the year
Variable
$
725,000
Fixed
$
4,250,000
Production and sales for the year
Units...
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