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 2018 and 2019. Its $26 per unit product cost consists of the following.

Direct materials ..................................................................... $ 4Direct labor ............................................................................... 6Variable overhead .................................................................... 8Fixed overhead ($480,000?60,000 units) ................................ 8Total 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:

2019 2018 Sales ($35 per unit). . Cost of goods sold ($26 per unit) Gross margin.... Selling and administrative expenses $2,275,000 1,690,000 585,000 495,000 $1,925,000 1,430,000 465,000 30,000 $ 90,000 Net income 2018 2019 Units produced.. Units sold 60,000 55,000 60,000 65,000