CK Company sells its products for $50 each. The current production level of the current year is 20,000 units, although only 15,000 units are anticipated to be sold.

Unit manufacturing costs are:

Direct materials $8.00

Direct manufacturing labor $10.00

Variable manufacturing costs $7.00

Total fixed manufacturing costs $200,000

Variable Marketing expenses $6.00 per unit

Total fixed marketing expenses $160,000

Required: (a) Prepare income statements using absorption costing and variable costing respectively. (7 marks)

(b) Which inventory costing method do you think would be more useful for internal decision making, such as pricing decisions or product appraisal? Explain (3 marks)

Answer rating: 100% (QA)

Absorption costing is a method used by the management to absorb the costs incurred on a product Dire... View the full answer