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In: Accounting

The Bailey’s Corporation uses absorption costing for its external financial statements. Managers believe the Income Statements...

The Bailey’s Corporation uses absorption costing for its external financial statements. Managers believe the Income Statements are confusing, because they conflict with their “instincts” about profitability. The controller suggests that the organization use variable costing because it may give managers better information, especially for decisions about operations. The following information was pulled from last year’s publicly available Income Statement as well as internal records.

Data alternative 2

Cost per unit: $40 DM, $30 DL, $10 Variable OH

Fixed OH:      $150,000

Number of units: 15,000 produced and 12,000 sold

Sales price per unit $200

Fixed selling and administrative costs $600,000

Variable selling and administrative costs $5 per unit

Requirements:

a)     Use absorption costing. Find the unit cost and prepare an income statement.

b)     Use variable costing. Find the unit cost and prepare an income statement.

c)     Use super-variable costing. Find the unit cost and prepare an income statement.

Solutions

Expert Solution

a)

b)

c)

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ekkarill92 answered 2 years ago
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