2 3 Absorption vs. Variable Costing Brindle Arts uses Variable Costing for internal purposes, but uses Absorption Costing for their financial reports. The following information is for Quarters 3 and 4, 2022. Calculate unit product costs for Quarters 3 and 4 for Variable and Absorption Costing. Prepare an income statement for each method, then show why there is a difference between the two. Abs vs Var out of 20 points 456782QEEQEQAN Selling price per unit $ 205 Quarter 3 9 Units in beginning inventory Quarter 4 1,500 Variable costs per unit Direct materials $ 75.00 10 Production (in units) 12,000 12,500 Direct labor $ 25.00 11 Sales (in units) 10,500 14,000 12 Ending inventory 1,500 Variable overhead Variable S&A $ 20.00 $ 15.00 13 14 Fixed Costs in total per quarter 15 Fixed manufacturing overhead 16 Fixed selling & administrative $450,000 $450,000 17 Show the difference between variable costing NOI and absorption costing NOI. 18 19 Variable Costing 20 Compute the unit product costs for Quarters 3 and 4 21 Units in beginning inventory 22 Quarter 3 Quarter 4 + units produced 23 Variable unit product cost 24 25 Prepare an income statement for Quarters 3 and 4 26 27 Quarter 3 Quarter 4 - FOH in beg. inv. 28 Sales 29 Variable expenses: 30 Variable COGS 31 Variable S&A 32 Total variable expenses 33 Contribution Margin 34 Fixed expenses: - units sold = units in ending inventory FOH costs in ending inventory = FOH deferred in inventory or released from inventory Variable NOI Add/less: FOH deferred/released in inventory Absorption costing NOI 35 Fixed MOH 36 Fixed S&A 37 Total fixed expenses 38 Net Operating Income 39 40 41 42 Absorption Costing Compute the unit product costs for Quarters 3 and 4 43 44 Quarter 3 Quarter 4 45 Absorption unit product cost 46 47 Prepare an income statement for Quarters 3 and 4 48 49 Quarter 3 Quarter 4 50 Sales 51 COGS 52 Gross Margin 53 S&A Expenses 54 Net Operating Income 55 Quarter 3 Quarter 4 Select: Select: