Question
Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting.
Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 400 bikes were produced and 240 were sold; this left 160 bikes in ending inventory. The income statement information under variable costing follows.
Sales (240 $1,750) $ 420,000
Variable product cost (240 $675) 162,000
Variable selling and administrative expenses (240 $50) 12,000
Contribution margin 246,000
Fixed overhead cost 80,000
Fixed selling and administrative expense 75,000
Net income $ 91,000
1. Prepare this company's income statement for its first month of operations under absorption costing.
2. Fill in the blanks:
The dollar difference in variable costing income and absorption costing income = units fixed overhead per unit.
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