Foxtrot reported $65,000 of income for the year by using absorption costing. The company had no beginning inventory, planned and actual production of 20,000 units, and sales of 18,000 units. Standard variable manufacturing costs were $20 per unit, and total budgeted fixed manufacturing overhead was $100,000. If there were no variances, income under variable costing would be:

Question

Javier Harris

Business

2 November, 19:26

Foxtrot reported $65,000 of income for the year by using absorption costing. The company had no beginning inventory, planned and actual production of 20,000 units, and sales of 18,000 units. Standard variable manufacturing costs were $20 per unit, and total budgeted fixed manufacturing overhead was $100,000. If there were no variances, income under variable costing would be:

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Dalton Holland · Answer 1

Instructions are listed below

Explanation:

Giving the following information:

Foxtrot reported $65,000 of income for the year by using absorption costing.

The company had no beginning inventory.

Production of 20,000 units.

Sales of 18,000 units.

Variable manufacturing costs = $20 per unit.

Fixed manufacturing overhead was $100,000.

In absorption costing the fixed cost is distributed in all the units produced. We need to find sales revenue.

Absorption costing:

Cost per unit = $1000000/20000 + $20 = $25

Sales revenue = Total cost + income = 25*18000+65000 = $515000

Sales revenue 515000

- cost of goods sold 450000

income = 65000

Variable cost:

Sales revenue = 515000

- cost of goods sold = (18000*20) = 360000

- fixed cost = 100000

income = $55000