Question: Moseley Corp currently uses variable costing in its accounting system

Moseley Corp. currently uses variable costing in its accounting system, with the following selected results (assume there were no variances):
Contribution margin ....... $300,000
Variable selling and administrative . $100,000
Fixed selling and administrative .... $ 60,000
Net income .......... $150,000
During the period Moseley produced 160,000 units and sold 80,000 units. Selling price is $10/unit. There was no beginning or ending WIP inventory, and no beginning FG inventory. Moseley is considering a standard absorption costing system. It estimates that if it had used such a system this year, it would have budgeted fixed factory overhead at $100,000, and would have selected a denominator level of 200,000 units. The company also estimates that there would have still been no variances related to direct materials, direct labor, and variable factory overhead.
Present a standard absorption costing income statement with proration. Be sure to present the adjustment for variances amount on the income statement.

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  • CreatedNovember 19, 2014
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