Data for 2020:

Variable manufacturing cost $6.80 / unit

Fixed manufacturing cost $52,000

Beginning inventory 500 units; cost per unit was same as 2020.

Budgeted level of production 10,000 units

Actual Production 10,200 units

Sales 10,300 units @ $21.50/unit

Variable selling costs $ .90 / unit sold

Fixed selling costs $12,000

Create Absorption and Variable costing income statements. Be sure to include the following terms as appropriate: Cost of Goods Sold, Contribution Margin, Gross margin, Operating income.

Hint: Be sure to account for the Production Volume Variance properly in the income statement.

Absorption Costing income statement (8 points) Variable costing income statement (8 points)

Revenue $221,450 Revenue $221,450

2. Do either A (2 points) or B (6 points). If you do both, only B will be graded.

A. How much fixed cost is included in ending inventory using:

Absorption costing _________________________ Variable costing ________________________________

B. Explain the difference in income between absorption and variable costing. Calculate the difference. Then use calculations to verify (justify or explain) the difference.