Income Statements, Variable and Absorption Costing

The following information pertains to Vladamir, Inc., for last year:

Beginning inventory, units		1,500
Units produced		100,000
Units sold		101,000
Variable costs per unit:
Direct materials		$8.00
Direct labor		$9.00
Variable overhead		$1.00
Variable selling expenses		$2.00
Fixed costs per year:
Fixed overhead		$200,000
Fixed selling and administrative expenses		$230,000

There are no work-in-process inventories. Normal activity is 100,000 units. Expected and actual overhead costs are the same. Costs have not changed from one year to the next.

Required:

Question Content Area

1. How many units are in ending inventory? fill in the blank 3ae0c2053fd1041_1 units

2. Without preparing an income statement, indicate what the difference will be between variable-costing income and absorption-costing income. $fill in the blank 3ae0c2053fd1041_2

1. Ending inventory = Beginning inventory + Units produced - Units sold

2. First, determine the fixed overhead rate. Then use the formula: Fixed overhead rate x (Production - Sales)

Question Content Area

3a. Assume the selling price per unit is $32. Prepare an income statement using variable costing.

Vladamir, Inc. Variable-Costing Income Statement For Last Year

Fixed overheadFixed selling and administrative expensesSalesVariable cost of goods soldVariable selling expensesSales	$Sales
Less:
Fixed overheadFixed selling and administrative expensesSalesVariable cost of goods soldVariable cost of goods sold	Variable cost of goods sold
Fixed overheadFixed selling and administrative expensesSalesVariable selling expensesVariable selling expenses	Variable selling expenses
Contribution margin	$fill in the blank ba8f9501cfd601d_7
Less:
Fixed overheadSalesVariable cost of goods soldVariable selling expensesFixed overhead	Fixed overhead
Fixed selling and administrative expensesSalesVariable cost of goods soldVariable selling expensesFixed selling and administrative expenses	Fixed selling and administrative expenses
Operating income	$fill in the blank ba8f9501cfd601d_12

3b. Assume the selling price per unit is $32. Prepare an income statement using absorption costing.

Vladamir, Inc. Absorption-Costing Income Statement For Last Year

Cost of goods soldFixed selling and administrative expensesSalesSales	$Sales
Less: Cost of goods soldLess: Fixed selling and administrative expensesLess: SalesLess: Cost of goods sold	Less: Cost of goods sold
Gross profit	$fill in the blank 3d8f50f5efe8fc4_5
Less: Cost of goods soldLess: Selling and administrative expensesLess: SalesLess: Selling and administrative expenses	Less: Selling and administrative expenses
Operating income	$fill in the blank 3d8f50f5efe8fc4_8