Question
Consider the following budget information for a single product firm projecting its first three years of operations: Sales price $ 50 per unit sold Variable
Consider the following budget information for a single product firm projecting its first three years of operations:
Sales price $ 50 per unit sold
Variable manufacturing costs $ 20 per unit produced
Variable selling and administrative expenses $ 10 per unit sold
Total fixed manufacturing overhead $ 48,000 per year
Total fixed selling and administrative $ 32,000 per year
All units started into production in a given day will be completed that day, i.e., the firm will have no work-in-process inventories. The firm uses a FIFO inventory flow assumption. (For absorption costing, assume the firm calculates a new fixed overhead rate each year, based on that years projected production in units.)
|
Year 1 |
Year 2 |
Year 3 |
Production in units |
6,000 |
8,000 |
4,000 |
Sales in units |
6,000 |
6,000 |
6,000 |
Assuming that the firms actual costs, selling price and volume of production and sales are exactly as budgeted, complete the tables below:
Unit product cost with: | Year 1 | Year 2 | Year 3 |
Variable Costing |
|
|
|
Absorption Costing |
|
|
|
Operating Income with: | Year 1 | Year 2 | Year 3 |
Variable Costing |
|
|
|
Absorption Costing |
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|
|
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