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    Absorption and Variable costing

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    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