Absorption vs$.$ Variable Costing Assignment $($PART TWO$)$

B Company

Beginning inventory is $4,000$ units

All rates were the same in the previous year.

BUDGETED:

Sales $60,000$ units $[$at $$50$ per unit$]$

Production $75,000$ units

Variable mfg$.$ cost $$20$ per unit $[$DM$-$$$8$; DL$-$$$7$;

Var. mfg$.$ overhead$-$$$5]$

Fixed mfg$.$ cost $$10$ per unit $[$based on planned prod. of $75,000$ units$]$

Var. S&A cost $$3$ per unit $[$based on units sold$]$

Fixed S&A cost $$2$ per unit $[$based on planned sales of $60,000$ units$]$

ACTUAL:

Sales $58,000$ units @ $$50$

Production $65,000$ units

There were no efficiency variances.

There were no fixed S&A spending variances. We spent the same as budgeted.

There was $$50,000F$ in material, labour and variable overhead spending variances.

There was a $$20,000$ unfavourable fixed overhead spending variance.

Fixed overhead denominator variance must be calculated.

REQUIRED: Make an excel spreadsheet, using cell references wherever possible, that will allow a user to enter the above numbers and...

Compute net income using Absorption costing.

Compute net income using Variable $($direct$)$ costing.

Reconcile the difference in net income.