Question
Example Variable vs. Full Absorption Costing A company that uses a FIFO inventory system and began operations in Year 1 has the following information. Year
Example Variable vs. Full Absorption Costing
A company that uses a FIFO inventory system and began operations in Year 1 has the following information.
Year 1 Year 2
Sales units 8,000 10,000
Selling price $45 $46
Production units 12,000 8,000
Unit direct material cost $2.00 $2.00
Unit direct labor cost $1.00 $1.00
Unit commission cost $.50 $.50
Annual Fixed Overhead $180,000 $180,000
Annual Fixed S,G,&A $140,000 $150,000
1. What are the inventoriable cost per unit in years 1 and 2?
Absorption Costing Variable Costing
2. What would the income statements look like?
Absorption Costing Variable Costing
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