Income statements. (SMA, adapted) (30-40 minutes) Ericsson, AB, manufactures and sells a single product. The following data cover the two latest years of operations: hyt8

REQUIRED 1. Prepare two income statements for 2001, one under variable costing and one under absorption costing.
2. Explain briefly why the operating profit figures calculated in requirement 1 agree or do not agree.
3. Give two advantages and two disadvantages of using variable costing for internal reporting.

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2000 2001 Unit data Sales Opening stock Closing stock Selling price per unit Cost data Standard fixed costs Manufacturing overhead Marketing and administrative Standard variable costs per unit: Direct materials Direct manufacturing labour Manufacturing overhead Marketing and administrative 25,000 1,000 1,000 25,000 1,000 5,000 SKr 40 SKr 40 SKr 120,000 SKr 190,000 SKr 120,000 SKr 190,000 SKr 10.50 SKr 9.50 SKr 4.00 SKr 1.20 The denominator level is 30,000 output units per year. Ericsson's accounting records produce variable-costing information and year-end adjustments are made to produce external reports showing absorption- costing information. All variances are charged to cost of goods sold.