Explore BrainMass

Explore BrainMass

    Variable and Absorption Costing

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Prepare income statements under variable and absorption costing for the year ended December 31, 2007. - see attachment

    Jennifer Bruner
    Cost Accounting
    December 21, 2008

    Variable versus Absorption Costing

    Introduction:
    The Zwatch Company manufactures trendy, high-quality, moderately priced watches. As Zwatch's senior financial analyst, you are asked to recommend a method of inventory costing. The CFO will use your recommendation to prepare Zwatch's 2007 income statement.

    Beginning inventory, January 1, 2007 85,000 units
    Ending inventory, December 31, 2007 34,500 units
    2007 sales 345,400 units
    Selling price (to distributor) $22 per unit
    Variable manufacturing cost per unit, including direct materials $5.10 per unit
    Variable operating cost per unit sold $1.10 per unit sold
    Fixed manufacturing costs 1,440,000
    Denominator-level machine hours 6,000
    Standard production rate 50 units per machine-hours
    Fixed operating costs $1,080,000

    Assume standard costs per unit are the same for units in the beginning inventory and units produced during the year. In addition, assume no price, spending, or efficiency variances. Any production volume-variance is written off to cost of goods sold in the month when it occurs.

    Task(s):
     Prepare income statements under variable and absorption costing for the year ended December 31, 2007.

    Deliverables and format:
    Microsoft Excel document, showing all calculations

    © BrainMass Inc. brainmass.com June 3, 2020, 10:18 pm ad1c9bdddf
    https://brainmass.com/business/accounting/225070

    Attachments

    Solution Summary

    The solution explains how to prepare an income statement using variable costing and absorption costing

    $2.19

    ADVERTISEMENT