Prepare an analysis showing whether the company should eliminate the line.

Instructions

Calculate net income under variable costing for each year.

Calculate net income under absorption costing for each year.

Reconcile the differences each year in income from operations under the two costing approaches.

 

Their first year of operation: 25,000 Units Produced 18,000 Units Sold Their second year of operation, the results were exactly reversed: 18,000 Units Produced 25,000 Units Sold Each year the following unit prices were the same: $100 Selling Price $40 Variable Manufacturing Costs $8 Variable Selling Costs $540,000 Fixed Manufacturing Costs $200,000 Fixed Administrative Expenses