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Werewolf’s Manufacturing began its operations on January 1 of the current year. Werewolf produced 10,000 units...

Werewolf’s Manufacturing began its operations on January 1 of the current year. Werewolf produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000.

Werewolf’s Manufacturing began its operations on January 1 of the current year. Werewolf produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000.

Please construct an income statement

  1. Under absorption costing, what was Werewolf’s operating income?   
  2. Under absorption costing, what was Werewolf’s ending inventory on the balance sheet?
  3. Under variable costing, what was Werewolf’s operating income?
  4. Under variable costing, what was Werewolf’s ending inventory on the balance sheet?
  5. Explain the cause of the difference between the absorption and variable costing net incomes and the ending inventory balances under absorption and variable costing.

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Expert Solution

ekkarill92 answered 2 years ago
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