Question

Nadal Enterprises produces tennis balls which it sells in cannisters with three tennis balls per cannister. During the year 21,000 cannisters were produced. They began the year with no inventories of tennis balls and ended the year with 2,200 canisters in inventory.

Information on the year's operations is as follows:

Revenue

$ 94,000

Variable direct production costs

42,000

Variable production overhead

15,750

Variable selling and administrative costs

1,880

Fixed production overhead

21,000

Fixed selling and administrative costs

16,320

Nadal Enterprises uses and actual costing system.

1) income statement under:

absorption costing

Variable costing  

2) Reconcile the profit figures calculated in a) and b) above. provide calculations reconciling the figures, and explain why there is a difference.

Answer 1