Carlos Reyes expects sales of Business Solutions line of computer workstation furniture to equal 300 workstations (at a sales price of

$3,000 each) for 2021. The workstations manufacturing costs include the following.

Direct materials

$800

per unit

Direct labor

$400

per unit

Variable overhead

$100

per unit

Fixed overhead

$24,000

per year

Selling and administrative expenses for these workstations follow.

Variable

$50

per unit

Fixed

$4,000

per year

Carlos is considering how many workstations to produce in 2021. He is confident that he will be able to sell any workstations in his

2021 ending inventory during 2022. However, Carlos does not want to overproduce as he does not have sufficient storage space for

many more workstations.

Required:

1. Complete the following income statements using absorption costing.

2. Complete the following income statements using variable costing.

3. Reviewing results from parts 1 and 2, which costing method, absorption or variable, yields the higher income when 320 workstations are

produced and 300 are sold?

Production volume

Product cost per unit - Absorption costing

300 workstations

320 workstations

Direct materials per unit

Direct labor per unit

Variable overhead per unit

Fixed overhead per unit

Product cost per unit - Absorption costing

Number of workstations sold

Total cost of goods sold

BUSINESS SOLUTIONS

Income Statements (Absorption Costing)

Production volume

Sales volume - 300 Workstations

300 workstations

320 workstations

BUSINESS SOLUTIONS

Income Statements (Variable Costing)

Production volume (units)

300 workstations

320 workstations

Sales volume (units)

300 workstations

300 workstations