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Income Statement for Dean Company

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1. The Dean Company produces and sells a single product. The following data refer to the year just completed:
Selling Price $ 350

Units in beginning Inventory 0
Units Produced 20000
Units sold 19000

Variable Costs per unit:
Direct materials $ 190
Direct labor $ 40
Variable manufacturing overhead $ 25
Variable selling and admin $ 10

Fixed Costs:
Fixed manufacturing overhead $ 250,000
Fixed selling and admin $ 225,000
Assume that direct labor is a variable cost.
Required:
a. Compute the cost of a single unit of product under both the absorption costing and variable costing approaches.
b. Prepare an income statement for the year using absorption costing.
c. Prepare an income statement for the year using variable costing.

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Solution provided by:
Gaurav Agarwal, MS
Education
  • BE, Bangalore University, India
  • MS, University of Wisconsin-Madison
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