Income Statements, Variable and Absorption Costing
The following information pertains to Vladamir, Inc., for last year:
| Beginning inventory, units | 1,400 | ||
| Units produced | 100,000 | ||
| Units sold | 101,000 | ||
| Variable costs per unit: | |||
| Direct materials | $8.00 | ||
| Direct labor | $9.00 | ||
| Variable overhead | $1.00 | ||
| Variable selling expenses | $2.00 | ||
| Fixed costs per year: | |||
| Fixed overhead | $300,000 | ||
| Fixed selling and administrative expenses | $230,000 |
There are no work-in-process inventories. Normal activity is 100,000 units. Expected and actual overhead costs are the same. Costs have not changed from one year to the next.
Required:
1. How many units are in ending inventory?
2. Without preparing an income statement, indicate what the difference will be between variable-costing income and absorption-costing income.
3a. Assume the selling price per unit is $30. Prepare an income statement using variable costing.
| Vladamir, Inc. | |
| Variable-Costing Income Statement | |
| For Last Year | |
| $ | |
| Less: | |
| Contribution margin | $ |
| Less: | |
| Operating income | $ |
3b. Assume the selling price per unit is $30. Prepare an income statement using absorption costing.
| Vladamir, Inc. | |
| Absorption-Costing Income Statement | |
| For Last Year | |
| $ | |
| Gross profit | $ |
| Operating income | $ |
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