Q2

Faca, Inc., manufactures specialized knives made for the professional cook. Faca began 2019 with

an inventory of 240 knife sets. During the year, it produced 900 knife sets and sold 995 for $750 each.

Fixed production costs were $280,000 and variable production costs were $335 per set. Fixed

advertising, marketing, and other general and administrative expenses were $112,000and variable

shipping costs were $15 per knife set. Assume that the cost of each set in beginning inventory is equal

to 2019 inventory cost.

Required

1. do an income statement assuming Faca uses variable costing.

2. do an income statement assuming Faca uses absorption costing. Faca uses a

denominator level of 1,000 units (denominator of the overhead allocation rate). Over or

under allocated overhead is written off to cost of goods sold.