Problem #$1$:

Facts: D$.$ Prescott Corporation gathered the following information for the year ended:

Fixed costs:

Manufacturing OH $$90,000$

Marketing $44,000$

Administrative $62,000$

Variable costs per unit:

Direct Materials, Direct

Labor, and Man. OH $$8$

Marketing $2$

Administrative $3$

During the year, D$.$ Prescott produced $60,000$ and sold $50,000$ units of product at a selling price of $$9\mathrm{.}00$

per unit. There was no beginning inventory of product at the start of the year.

Required:

What is the net income for the year under absorption costing?

What is the net income for the year under variable costing?

Why is net income not the same under both absorption and variable costing?