Question

Variable and Absorption Costing Grant Company sells its product for $53 per unit Variable manufacturing costs per unit are $32, and fixed manufacturing costs at the normal operating level of 18,000 units are $90,000. Variable selling expenses are $4 per unit sold. Fixed administrative expenses total $155,000. Grant had 7,000 units at a per-unit cast of $37 in beginning inventory in 2016. During 2016, the company produced 18,000 units and sold 20,000. Would net income for Grant Company in 2016 be higher if calculated using variable casting or using absorption costing? Calculate reported income using each method Do not use negative signs with any answers. Absorption Costing Income Statement Sales $ 1,060,000 Cast of Good: Solat Reginning wentary 259.000 Variable Casts 576000 Fised Coats Les Ending Inventory OX Cost of Good Solo 750,000 X Gross profit 1,059,250 Selling expense 80,000 Aimintative expense 155.000 Nincome 924,250 X Variable Costing Income Statement Sains 3 1.050.000 Cast af Cards Sold Reginning inventory 224,00 Variable CASS 575.000 Less: Fading intory 150,000 x Variable cost of goods sold 653000 x Grossprofil 210000 x Manufacturing cost 90.000 x Fixed costs Contribution margin 80.000 x Administrative Expense 155.000 Tola Fed Cust 235.000 X Nel Income 85,000 x

Answer 1

Absorption costing income statement
Sales		$1,060,000
Cost of goods sold
Beginning inventory	$259,000
Variable cost	$576,000
Fixed costs	$90,000
Less: ending inventory	$185,000
Cost of goods sold		$740,000
Gross Profit		$320,000
Selling expenses		$80,000
Administrative expenses		$155,000
Net income		$85,000

Variable costing income statement
Sales		$1,060,000
Cost of goods sold
Beginning inventory	$259,000
Variable cost	$576,000
Less: ending inventory	$160,000
Cost of goods sold		$675,000
Manufacturing margin		$385,000
Variable Selling expenses		$80,000
Contribution maring		$305,000
Fixed costs:
Fixed manufacturing oh	$90,000
Administrative expenses	$155,000
Total fixed cost		$245,000
Net income		$60,000