Betty Inc. operated at 100% of capacity during its first month and provided following information:
Number of units produced:	20,000
Production costs (20,000 units):	Total costs	Unit costs
Direct materials	$120,000	$6.00
Direct labor	$80,000	$4.00
Variable factory overhead	$45,000	$2.25
Fixed factory overhead	$30,000	$1.50
Operating expenses:
Variable operating expenses	$40,000
Fixed operating expenses	$15,000
Betty sold 15,000 units during the first month at a price of $28 per unit.
Required:
A. Calculate the following Using Absorption Costing method:
Product costs per unit:
Sales revenue:
Costs of goods sold:
Gross profit:
Operating expenses:
Income from operations:
Ending inventory:
B. Calculate the following using Variable Costing method:
Product costs per unit:
Sales revenue:
Total variable costs (VCOGS + VSA):
Contribution margin:
Total fixed costs (Fixed OH + FSA):
Income from operations:
Ending inventory:
C. What is the difference between the ending inventories computed under absorption and variable costing?
Explain the reason behind this difference.
The difference in ending inventory:
Explanation: