Edison Digital manufactures palmtop computers. The following data from the company are available for 2000 and 2001:
Standard costs per unit for 2000 and 2001 were
Direct material …………………….. $20.00
Direct labor………………………… 60.00
Variable overhead…………………. 20.00
Fixed overhead ……………………. 30.00 (based on budget of $750,000 and normal
capacity of 25,000 units)
Variable sales commission………… 20.00
In addition, selling and administrative fixed costs were $190,000 for both years.
All variances are charged or credited to Cost of Goods Sold.
Prepare income statements under absorption and variable costing for the years ended 2000 and 2001. Reconcile the differences in income between the methods. (Ignore taxes.)
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