Variable vs. Absorption costing

timer Asked: Nov 23rd, 2016

Question description

In 2014 (last year), the Plant Company produced 50,000 units (the normal volume) and sold 46,000.  The following sales and cost information relates to 2014:

  sales price................    $20.00/ unit

  unit costs:

  direct material...........    $4.00

  direct labor..............    $3.00

  variable factory overhead.    $2.50

  fixed factory overhead....  .  $1.50 (based on normal production)

  variable selling expenses.    $2.50

In addition to the above costs, Plant had total fixed administrative expenses in 2014 of $200,000.

In the current year (2015), Plant experienced the same selling prices (and costs) as it did in 2014.  2015 production was equal to 49,000 units.  2015 sales totaled 48,000 units.


1. Prepare an income statement under the variable costing format for year 2015.

2. Prepare an income statement under the absorption costing format for 2015.

3. Determine Plant's breakeven level of sales under the variable costing format (in units).

4. Reconcile the difference in income in requirements 1 and 2.

Tutor Answer

(Top Tutor) Studypool Tutor
School: Carnegie Mellon University
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags
Study Guides

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors