Please explain the below solution. Is the $5 variable cose from the $100,000 left over after the $200,000 fixed manufacturing costs and that divided by $15000 units? and how did he get teh $90,000 variable selling and administrative

Thanks

kathy

II) Variable vs. Absorption Costing (15 points)

The manager of the manufacturing division of Illinois Glass does not understand why income (under the variable costing approach) is so low in January relative to the ABSORPTION costing approach. 20,000 units were produced in January

Units sold Sales Beginning inventory (absorption) Cost of inventory production (Fixed and variable) Ending inventory (absorption) Operating income (absorption)

January 15,000 $450,000 0 $300,000 $75,000 $35,000

The fixed manufacturing costs were $200,000. Fixed Selling and administrative expenses were $100,000.

What is the average production cost per unit? $15 using inventory

FC/unit = 200.000/20,000 = $10 VC unit = $5

Determine the variable production cost per unit. Complete the following income statement under variable costing for January

January Income Statement

Sales Revenue $450,000

Variable COGS $5x 15,000 ($75,000)

Variable Selling

& Administrative (90,000)

Contribution Margin . 285,000

Fixed Manufacturing ($200,000)

Fixed Selling

& Administrative ($100,000)

_________________

Operating Income (Variable Costing) 35,000-$10x 5,000 =(15,000)