XYZ Company sells its razors at $8.00 per unit. The following data relates to its
first year of operations.
Sales 500 units
Production 1,000 units
Variable manufacturing $ 400
Fixed manufacturing 800
Variable selling 400
Fixed selling 200
a) Prepare an income statement based on variable costing.
b) Prepare an income statement based on absorption costing.
c) Provide all computations for each, example: Sales= Total Units Sold (500) x Price (8.00).
(a) Income Statement - Variable Costing
Sales = Total Units Sold (500) * Sale Price (8) = $4,000
Variable Manufacturing (VM)= $400
Variable Selling (VS) = $400
Contribution Margin (CM) = Sales (4000) - VM (400) - VS ...
The solution provides Income Statement under both Variable Costing and Absorption Costing.