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E7.31 (appendix) Variable and absorption costing: manufacturer Potter Ltd began operations on 1 January and achieved the following results for the year: L07.11 Sales 36
E7.31 (appendix) Variable and absorption costing: manufacturer Potter Ltd began operations on 1 January and achieved the following results for the year: L07.11 Sales 36 000 units Selling price $45 per unit Manufacturing costs: Direct material $12 per unit Direct labour $6 per unit Variable overhead $9 per unit Fixed manufacturing overhead $300 000 Selling and administrative costs: Variable $3 per unit sold Fixed $30 000 Production 37 500 units Required: 1. Prepare an absorption costing income statement for Porter Ltd. 2. Prepare a variable costing contribution margin statement for Porter Ltd. 3. Reconcile the differences between the prots under the two statements by: (a) identifying the areas where the statements differ (b) using the short-cut method
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