Fartlek Shoe Company is concerned with changing to the variable costing method of inventory valuation for making
Question:
Fartlek Shoe Company is concerned with changing to the variable costing method of inventory valuation for making internal decisions. Functional income statements using absorption costing for January and February follow.
The preceding selling and administrative expenses include variable costs of \($1\) per unit sold.
Required
a. Compute the absorption cost per unit manufactured in January and February.
b. Explain why the net income for January was higher than the net income for February when the same number of units was sold in each month.
c. Prepare contribution income statements for both months using variable costing.
d. Reconcile the absorption costing and variable costing net income figures for each month. (Start with variable costing net income.)
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