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HELP NEEDED for PA.13 Please PA13. LO 6.5 Grainger Company produces only one product and sells that product for $100 per unit. Cost information for
HELP NEEDED for PA.13 Please
PA13. LO 6.5 Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is: Direct Material $15 per Unit Direct Labor $25 per Unit Variable Overhead $5 per Unit Fixed Overhead $34,000 Selling expenses are $4 per unit and are all variable. Administrative expenses of $20,000 are all fixed. Grainger produced 5,000 units; sold 4,000; and had no beginning inventory. A. Compute net income under 1. absorption costing II. variable costing B. Reconcile the difference between the income under absorption and variable costing, Solution I. Absorption Costing: A. Sales 400,000 Page 10 of 16 OpenStax Principles of Accounting, Volume 2: Managerial Accounting Chapter 6: Activity-Based, Variable, and Absorption Costing Cost of Goods Sold: Direct Materials 60,000 Direct Labor 100,000 Variable Overhead 20,000 Fixed Overhead 34,000 Subtotal 214,000 Ending Inventory I Cost of Goods Sold Gross Profit Selling Expenses Administrative Expense Net Income 400,000 60,000 100,000 20,000 180,000 II. Variable Costing: Sales Variable Expenses: Direct Materials Direct Labor Variable Overhead Subtotal Ending Inventory Variable Cost of Goods Sold Variable Selling Expenses Contribution Margin Fixed Expenses: Fixed Manufacturing Overhead Fixed Administrative Expenses Net Income B. In this problem, the costing method provided more net income. The reason for the difference is Step by Step Solution
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