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Absorption and Variable costing

Bruster Company sells its products for $66 each. The current production level is 25,000 units, although only 20,000 units are anticipated to be sold.

Unit manufacturing costs are:
Direct materials $12.00
Direct manufacturing labor $18.00
Variable manufacturing costs $9.00
Total fixed manufacturing costs $180,000
Marketing expenses $6.00 per unit, plus $60,000 per year

a. Prepare an income statement using absorption costing.

b. Prepare an income statement using variable costing.


Revenues $1,320,000
Cost of goods sold:
Beginning Inventory $-
Variable manufacturing costs $225,000
Allocated fixed manufacturing costs $180,000
Cost of goods available for sale $405,000
Less: Ending inventory $(330,000)
Adjustment for production-voulme variance $-
Cost of goods sold: $75,000
Gorss margin $1,245,000
Operating costs:
Variable operating costs $225,000
Fixed operating costs $210,000
Total operating costs
Operating income

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Revenues $1,320,000
Cost of goods sold:
Beginning ...

Solution Summary

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