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Ideal Manufacturing Company

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Need assistance with the attached file on variable and absorption methods. See attached file for full problem description.

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Solution Summary

This solution is comprised of a detailed explanation to prepare income statement for: -
(a) Income under variable costing for 2006
(b) Income under absorption costing for 2006
(c) Income under variable costing for 2007
(d) Income under absorption costing for 2007

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1- Ideal Manufacturing Company sells its product for $9,000 per unit. Variable costs per unit are:
manufacturing , $4,000; and selling and administrative, $125. Fixed costs are: $35,000
manufacturing overhead, and $45,000 selling and administrative. There was no beginning
inventory at 01/01/05. Production was 20 units per year in 2005-2007. Sales was 20 units
in 2005, 15 units in 2006, and 25 units in 2007.

(a) Income under variable costing for 2006
(b) Income under absorption costing for 2006
(c) Income under variable costing for 2007
(d) Income under absorption costing for 2007

a) Variable costing income statement for 2006

unit product cost under variable costing = 4,000

Sales (15 units x 9,000) 135,000
Total Variable Costs:
Beginning Inventory -
Manufacturing costs (4,000 x 20) 80,000
Total ...

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