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During its second year of operations, Grilling Machines, an entity that manufactures and sells electric tabletop grills, produced 275,000 units and sold 250,000 units at
During its second year of operations, Grilling Machines, an entity that manufactures and sells electric tabletop grills, produced 275,000 units and sold 250,000 units at $60 per unit. The beginning inventory balance was 5000 units. No changes in fixed or variable cost occurred in the second year. The managers expected to sell 220,000 units, the same volume of manufacturing as last year. They set that amount as the normal capacity for allocating fixed overheads during the second year. For simplicity, assume that the budgeted fixed manufacturing overhead cost equals the actual cost this period. Assume the entity uses FIFO (First in first out) cost flow assumption. The following cost were incurred during the year. a. prepare income statements using Absorption costing and Variable costing b. reconcile the difference between operating incomes based on absorption costing and variable costing
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