14. Majestic Industries has one product. Information about the production and sales of that product for the past year follow. (Click the icon to view the data.) The company had no beginning inventory Read the requirements Requirement 1. Prepare two income statements for the year, one using absorption costing and one using variable costing. Begin by preparing the income statement for the year using absorption costing, Majestic Industries Income Statement (Absorption Costing) For the Year Ended (1) Sales revenue Less: (2) Cost of goods sold (3) Gross profit Less (4) Operating expenses 768000 (5) Operating income Now prepare the income statement for the year using variable costing Majestic Industries Contribution Margin Income Statement (Variable Costing) For the Year Ended Less (10) Less (13) (14) Use the statements you prepared to answer the following questions 1a. What is the product cost per unit using absorption costing? 1b. What is the product cost per unit using variable costing? What is the ending inventory balance using absorption costing? 1d. What is the ending inventory balance using variable costing? 1e. What is cost of goods sold using absorption costing? 1f. What is cost of goods sold using variable costing? 1g. What is operating income using absorption costing? 1h. What is operating income using variable costing? Requirement 2. What is the underlying reason for the difference in operating income between the two costing methods? (15) costing generates a higher operating income. This is because under absorption costing, (16) -, whereas variable costing (17) 1: Data Table Selling price per unit........... ........... $ Direct material per unit............ ... $ Direct labor per unit................................. Total annual manufacturing overhead .................. Fixed portion of annual manufacturing overhead .......... $ Variable operating expenses per unit sold................ $ Fixed operating expenses per year in total ......... Units manufactured ....... Units sold ..................................... 48.00 23.00 4.00 189,000 168,000 2.00 45,000 21,000 16,000 1 2: Requirements 1. Prepare two income statements for the year, one using absorption costing and one using variable costing. Use those statements to answer the following questions: a. What is the product cost per unit using absorption costing? b. What is the product cost per unit using variable costing? C. What is the ending inventory balance using absorption costing? d. What is the ending inventory balance using variable costing? e. What is cost of goods sold using absorption costing? f. What is cost of goods sold using variable costing? g. What is operating income using absorption costing? h. What is operating income using variable costing? 2. What is the underlying reason for the difference in operating income between the two costing methods
