Flores Company produces a single product. Its income statement 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 2008 and 2009. 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 twoyears.

Transcribed Image Text:

2008 2009 Cost of goods sold ($26 per unlt) 430000 ,690.000 Gross margin. Selling and adminlstrative expenses 495,000 465,000 585,000 495.000 2008 2009 Units produced ····.. . Unlts sold 60.000 55,000 65,000 60.000 2008 2009 Varlable selling and administrative ($3 per unit) $165.000 $195.000 Fixed selling and administrative _.. __... 300,000 300.000 Total selling and administrative__.... $465,000 $495.000