Simple numbers are used in this problem to highlight the concepts covered in the chapter.

Assume that the Canberra Company produces one product—a bath mat—

that sells for $10. Canberra uses a standard-cost system. Total standard variable costs of production are $4 per mat, fixed manufacturing costs are $1,500 per year, and selling and administrative expenses are $300 per year, all fixed.

Expected production volume is 500 mats per year.

1. For each of the following nine combinations of actual sales and production

(in units) for 2006, prepare condensed income statements under variable costing and under absorption costing.

Use the following formats:

Transcribed Image Text:

(1) (2) (3) (4) (5) (6) (7) (8) Sales units 300 400 500 400 500 600 500 600 700 Production units 400 400 400 500 500 500 600 600 600