Absorption costing versus direct costing
Haille Corporation has determined the following selling price and manufacturing cost per unit based on normal production of 72,000 units per year:
|
Selling price per unit |
22 |
|
Variable cost per unit: |
|
|
Direct materials |
4 |
|
Direct labor |
4 |
|
Variable factory overhead |
2 |
|
Variable cost per unit: |
10 |
|
Fixed cost per unit: |
|
|
Fixed factory overhead per year |
324,000 |
|
Fixed selling and administrative expense per year |
48,000 |
|
Normal unit production per year |
72,000 |
|
Month |
Units Produced |
Units Sold |
|
October |
6,000 |
3,000 |
|
November |
1,000 |
4,000 |
|
December |
8,000 |
6,000 |
October has no beginning inventories.
Required:
Prepare comparative income statements for each month under each of the following:
1. Absorption costing (include under- or overapplied overhead)
2. Variable costing