Question 1:

In 2020, Angelone Inc. completed its first year of business. It has maintained inventory records under both variable costing and absorption costing. Fixed manufacturing costs are allocated on the basis of budgeted production. The company's accounting policy is to dispose of manufacturing variances by expensing as cost of goods sold. All rate, efficiency and spending variances are zero.

Direct labor was 4.5 hours per unit at a rate of $15 per hour. Direct material was $60 per unit. In addition, variable manufacturing overhead of $12 per hour was incurred for each direct labor hour.

The master budget for the year included the following values: fixed manufacturing overheads of $900,000, non-manufacturing fixed overheads of $125,000 and a denominator volume of 45,000 units.

During the year 43,000 units were produced. Sales results were disappointing with only 40,000 units sold at a price of $350 each, with variable selling costs of $16 each. Fixed overheads were exactly equal to the budget.

In 2021, direct labor was 4.5 hours per unit at a rate of $16 per hour. Direct material was $65 per unit. Variable manufacturing overhead of $12 per hour was incurred for each direct labor hour.

The master budget for the year included the following values: fixed manufacturing overheads of $1,000,000, non-manufacturing fixed overheads of $130,000 and a denominator volume of 45,000 units.

During the year 47,000 units were produced. Sales were 50,000 units sold at a price of $360 each, with variable selling costs of $20 each. Fixed overheads were exactly equal to the budget.

REQUIRED:

1. Prepare the income statement for 2021 under variable costing.(5 marks)
2. Prepare the income statement for 2021 under absorption standard costing.(5 marks)
3. Reconcile the differences in the 2021 operating income between absorption and variable costing methods.(2 marks)
4. Calculate the breakeven point in units under variable costing. (2 marks)
5. Calculate the breakeven point in units under absorption standard costing. (2 marks)
6. Prepare the income statement for 2021 under throughput costing.(5 marks)
7. Prepare the income statement for 2021 under absorption standard costing.(5 marks)