Requirement :

1-Prepare the income statements using the variable costing

2-Prepare the income statements using the ABSORPATION costing

3-EXPLAIN THE DIFFERNCES IN OPERATING INCOMS

Impact of Absorption Costing and Variable Costing on Profit Question: The following information is for Bullard Company, a producer of clock radios: 10,000 units $25 per unit $ 7 per unit Monthly budgeted production Sales price Variable manufacturing cost per unit Direct materials-$4 Direct labour-$1 Manufacturing overhead-$2 Fixed manufacturing cost $40,000 each month, $4 per each units for 10,000 units $3 per unit sold $20,000 each month Variable selling & overhead cost Fixed selling & overhead cost Assume Bullard has no beginning goods inventory at the beginning of month 1. We will look at absorption costing versus variable costing: Requirement: Prepare the income statements for Bullard Company using variable costing and absorption costing according to each scenario and answer the related question to each scenario. SCENARIO - 12,000 units produced is greater than 9,000 units sold Question: During month 2, Bullard Company produces 12,000 units but sells only 9,000 units. How does operating profit compare using absorption costing and variable costing when the number of units produced is greater than the number of units sold