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Ace Products sells its products for $ 2 2 each. Unit manufacturing costs are: direct materials, $ 4 . 0 0 ; direct manufacturing labour,
Ace Products sells its products for $ each. Unit manufacturing costs are: direct materials,
$; direct manufacturing labour, $; and variable manufacturing overhead, $ Total
fixed manufacturing overhead costs are $ and marketing expenses are $ per unit
plus $ per year. The current production level is units although only units
are anticipated to be sold.
Required:
a Prepare an income statement using absorption costing in the gross margin format.
b Prepare an income statement using variable costing in the contribution margin format.
c Provide a reconciliation of the difference between the operating income using absorption
costing and using variable costing.
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