Fancy Foot Cat Biscuits Company manufactures cat treats. The company has thefollowing actual data for January and
Question:
Fancy Foot Cat Biscuits Company manufactures cat treats. The company has thefollowing actual data for January and February 20xx.
| January | February |
Beginning inventory in kilograms | 0 | 2,000 |
Production in kilograms | 20,000 | 20,000 |
Sales in kilograms | 18,000 | 21,000 |
Variable manufacturing costs per unit produced | $8 | $8 |
Variable marketing costs per unit sold | $2 | $2 |
Fixed manufacturing costs | $30,000 | $30,000 |
Fixed marketing costs | $5,000 | $5,000 |
The selling price per kilogram is $20.00. The budgeted level of production used to calculate the budgeted fixed manufacturing cost per unit is 20,000 kilograms. There is no price, efficiency or spending variance. Any production-volume variance is written off to cost of goods sold in the month in which it occurs.
1. Prepare the January and February income statements for Fancy Foot CatBiscuits under:
(a) Variable costing and
(b) Absorption costing
2. Prepare a numerical reconciliation and explanation of the difference in theincome each month between variable costing and absorption costing.
Modern Advanced Accounting in Canada
ISBN: 978-1259087554
8th edition
Authors: Hilton Murray, Herauf Darrell