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Houston Company: Absorption and Variable Costing Net Income

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Houston Company has per-unit fixed and variable manufacturing costs of $40 and $15, respectively. Variable selling and administrative costs are $9 per unit. Consider the two independent cases that follow for the firm.
Case A: Variable-costing net income, $110,000; sales, 6,000 units; production, 6,000 units
Case B: Variable-costing net income, $178,000; sales, 7,500 units; production, 7,100 units


A. From a product-costing perspective, what is the basic difference between absorption costing
and variable costing?
B. Compute Houston's absorption-costing net income in Case A.
C. Compute Houston's absorption-costing net income in Case B.

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Solution Summary

This solution helps compute Houston's absorption-costing net income in each of the cases.