Exercise 06-5 Absorption costing and variable costing income statements LO P2 Rey Company's single product sells at a price of $223 per unit. Data for its single product for its first year of operations follow. 27 per unit 35 per unit Direct materials Direct labor Overhedd costs Variable overhead Pixed overhead per year Selling and administrative expenses Variable Fixed Units produced and sold 13 per unit $ 405,000 per year 25 per unit $ 214,000 per year 27,000 units 1. Prepare an income statement for the year using absorption costing 2. Prepare an income statement for the year using variable costing. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the year using absorption costing. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the year using absorption costing. REY COMPANY Absorption Costing Income Statement Sales Less: Cost of goods sold Direct materials Direct labor Variable overhead costs Fixed overhead costs Cost of goods sold Gross margin Selling general and administrative expenses Fixed selling and administrative costs Variable selling and administrative expenses Net income (loss) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the year using variable costing. REY COMPANY Variable Costing Income Statement Sales Less: Variable costs Direct materials Direct labor Variable overhead costs Variable selling and administrative expenses Total variable costs Contribution margin Less: Fixed expenses Fixed selling and administrative costs Fixed overhead costs 0 Net income (loss) Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1025 kayaks and sold 775 at a price of $1,025 each. At this first year-end, the company reported the following income statement information absorption costing Sales (775 - $1,025) Cost of goods sold (775 * $475) Gross margin Selling and administrative expenses Net income $ 794,375 368,125 426,250 210,000 $216,250 Additional Information a. Product cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production cost-the latter amount is based on $102,500 of fixed production costs allocated to the 1,025 kayaks produced. b. The $210,000 in selling and administrative expense consists of $75,000 that is variable and $135,000 that is fixed Required: 1. Prepare an income statement for the current year under variable costing. 2. Fill in the blanks: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the current year under variable costing. KENZI KAYAKING Variable Costing Income Statement Sales Less: Variable costs Variable product costs Variable selling and administrative expenses Total variable costs Contribution margin Less: Fixed expenses Fixed selling and administrative costs Fixed overhead costs Net income (loss) Net income under absorption costing is higher than net income under variable costing by: Fixed costs added to inventory a. Product cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production cost-the latter amount is based on $102,500 of fixed production costs allocated to the 1,025 kayaks produced. b. The $210,000 in selling and administrative expense consists of $75,000 that is variable and $135.000 that is fixed. Required: 1. Prepare an income statement for the current year under variable costing. 2. Fill in the blanks: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Fill in the blanks: The dollar difference in variable costing income and absorption costing income units foxed overhead per unit.
