Comparative income statements—variable and absorption costing
Using the information presented in E10-1, prepare comparative income statements for March (a) under absorption costing and (b) under variable costing.
Reference:
Computing unit cost and cost of inventory–variable and absorption costing
Verst Products Co. uses a process cost system and applies actual factory overhead to work in process at the end of the month. The following data came from the records for March:
Direct materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $200,000
Direct labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Variable factory overhead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 80,000
Fixed factory overhead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,000
Selling and administrative expenses . . . . . . . . . . . . . . . . . . . . . . $ 40,000
Units produced . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000
Units sold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Selling price per unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25
There were no beginning inventories and no ending work in process inventory.
From the information presented, compute the following:
1. Unit cost of production under absorption costing and variable costing.
2. Cost of the ending inventory under absorption costing and variable costing.
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