Information for Bob's Company is provided in E8-19.
In E8-19
Variable cost per unit
Direct materials ......................................................... $ 6.50
Direct labour ............................................................ 2.75
Variable manufacturing overhead .................................... 5.75
Variable selling and administrative expenses ....................... 3.90
Fixed costs for year
Fixed manufacturing overhead .................................... $285,000
Fixed selling and administrative expenses .........................240,100
Instructions
(a) Assume the company uses normal costing and uses the budgeted volume of 93,860 units to allocate the fixed overhead rate rather than the actual production volume of 95,000 units. The company expenses production volume variance to cost of goods sold in the accounting period in which it occurs. Do the following:
1. Calculate the manufacturing cost per unit.
2. Prepare a normal-costing income statement for 2012.
(b) Reconcile the difference in net income between the absorption-costing and normal-costing methods.