Azule Company produces a single product. Its income statements under absorption costing for its first two years of operation follow.

Additional Information
a. Sales and production data for these first two years follow:

b. Its variable cost per unit and total fixed costs are unchanged during 2014 and 2015. Its $26 per unit product cost consists of the following.
Direct materials..........................................$ 4
Direct labor.................................................6
Variable overhead.........................................8
Fixed overhead ($480,000/60,000 units)...............8
Total product cost per unit...........................$26
c. Its selling and administrative expenses consist of the following.

Required
1. Prepare this company's income statements under variable costing for each of its first two years.
2. Explain any difference between the absorption costing income and the variable costing income for these two years.

Transcribed Image Text:

2014 2015 Sales ($35 per unit) . _ .. . Cost of goods sold ($26 per unit) . $1,925,000 $2,275,000 ...430,000 1690,000 495,000 85.000 46000495.000 Selling and administrative expenses Net income . 30,00090,000 2014 2015 Units produced Units sold. 60,000 55,000 60,000 65,000 2014 Variable selling and administrative expenses ($3 per unit).... Fixed selling and administrative expenses..... . . . . Total selling and administrative expenses...... . . 2015 $195,000 300.000 $495,000 $165,000 ....300,000 $465,000 .. . . . .