Absorption and Variable Costing Income Statements: Production Exceeds Sales Glen

Question

Absorption and Variable Costing Income Statements: Production Exceeds Sales Glendale Company sells its product at a unit price of $12.00. Unit manufacturing costs are direct materials, $2.00; direct labor, $3.00; and variable manufacturing overhead, $1.50. Total fixed manufacturing costs are $20,000 per year. Selling and administrative expenses are $1.00 per unit variable and $11,000 per year fixed. Though 25,000 units were produced during 2009, only 23,000 units were sold. There was no beginning inventory. (a) Prepare a functional income statement using absorption costing. (Do not use negative numbers with your answers.)

Explanation / Answer

Unit product cost

Income statement

Direct materials $2.00 Direct labor 3.00 Variable manufacturing overhead 1.50 Fixed manufacturing 20,000 /25,000 0.80 Total unit cost $7.30

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