Woodson Company, a producer of solid oak tables, reports the following data from its current year operations, which is its second year of business.
Sales price per unit | $320 per unit |
Units produced this year | 115,000 units |
Units sold this year | 118,000 units |
Units in beginning-year inventory | 3,000 units |
Beginning inventory costs |
|
Variable (3,000 units × $135) | $405,000 |
Fixed (3,000 units × $80) | 240,000 |
Total | $645,000 |
Production costs this year |
|
Direct materials | $40 per unit |
Direct labor | $62 per unit |
Overhead costs this year |
|
Variable overhead | $3,220,000 |
Fixed overhead | $7,400,000 |
Nonproduction costs this year |
|
Variable selling and administrative | $1,416,000 |
Fixed selling and administrative | 4,600,000 |
1.Prepare the current year income statement for the company using absorption costing.
2.Prepare the current year income statement for the company using variable costing.
3.Explain any difference between the two income numbers under the two costing methods in parts 1 and 2.
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