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10:23 PM Sun'lS Mar ?@0 99%- AAE': costing. (b) Estimate operating income for a month in which 200 desks are manufactured and 220 are sold
10:23 PM Sun'lS Mar ?@0 99%- AAE': costing. (b) Estimate operating income for a month in which 200 desks are manufactured and 220 are sold ifthe entity uses absorption costing and allocates fixed manufacturing costs to inventory using a rate based on normal capacity of 150 desks per month. 9.13 Absorption and variable income; reconcile incomes L01 Rock Crusher Ltd produces two grades of sand (A100 and A300) used in the manufacture of industrial abrasives. The results of operations last year were as follows: A100 A300 Total Manufacturing 4000 tonnes 6000 tonnes 10000 tonnes Sales 3000 tonnes 4000 tonnes 7000 tonnes Revenue $90 000 $150 000 $240 000 Variable manufacturing costs $20 000 $15 000 $35 000 Variable selling costs $15 000 $20 000 $35 000 Fixed manufacturing costs were $100 000 and fixed selling and administrative costs were $60 000. The entity held no beginning inventories. Required Prepare a spreadsheet that can be used to answer all of the following questions. (a) If Rock Crusher uses a variable costing system, what was the operating income? (b) If Rock Crusher uses absorption costing and allocates actual fixed manufacturing costs to inventory on the basis of actual tonnes produced, what was the operating income? (c) Reconcile and explain the difference between your answers to parts (a) and (b). 9.14 Absorption and variable inventory and income L01
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