Overton Company produced 80,000 units last year. The company sold 79,000 units and there was no beginning inventory. The company chose practical activity at 80,000 units to compute its predetermined rate. Manufacturing costs are as follows:
Direct materials $596,000
Direct Labor $104,000
Variable Overhead $88,000
Fixed Overhead $228,000
Assume the sales price per unit is $18. Assume variable selling expenses are $1 per unit sold. Assume fixed selling and administrative expenses total $120,000.
REQUIRED: Prepare an Absorption-Costing Income Statement down to Operating Income (just like your Textbook does). Then prepare a Variable-Costing Income Statement in proper format down to Operating Income (just like your Textbook does). Note this exercise involves a situation where more units were made than sold.
|unit product cost||unit product|
|Absorption costing||variable costing|
|less cost of goods sold (79000*12.7)||1003300|
|less variable cost of goods sold (79000*9.85)||778150|
|fixed manufacturing overhead||228,000|