2. In 2020, ABC Company produces a single product with the following information:

Variable cost per unit:	SR
Direct martial PER UNIT	8
Direct labor per unit	10
Manufacturing over head	5
Variable selling expense per units sold	2

Additional information:	SR
Fixed manufacturing costs per year	150,000
Fixed selling and administrating expenses per year	150,000
Number of units produced	20,000
Selling price per unit	50

Required:

1. Prepare income statement using absorption costing and variable costing assuming all 20,000 units sold.
2. Prepare income statement using absorption costing and variable costing assuming all 15,000 units sold and 5,000 units unsold.
3. Comment on results explaining which costing method produces more profit in case of inventory.

Answer: