E 10- 3 Using variable costing and absorption costing The chief executive officer of Acadia, Inc. attended a conference in which one of the sessions was devoted to variable costing. The CEO was impressed by the presentation and has asked that the following data of Acadia, Inc. be used to prepare comparative statements using variable costing and the companys absorption costing. The data follow:

Direct materials............................................. $90,000

Direct labor................................................. 120,000

Variable factory overhead..................................60,000

Fixed factory overhead.....................................150,000

Fixed marketing and administrative expense. . . . . . . . . . . . . .180,000

The factory produced 80,000 units during the period, and 70,000 units were sold for $700,000.

1. Prepare an income statement using variable costing.

2. Prepare an income statement using absorption costing. (Round unit costs to three decimal places.)

Use this format:

Exerciso 10-3 Calculation of variable and fixed cost per unit: $ Amount Units Rato Materials: Direct labor: Variable factory overhead: Fixed overhead: per unit per unit per unit per unit 1 Richards Corporation Statement of Income - Variable Costing Sales Variable cost of goods sold: Materials Direct labor Variable overhead Contribution margin Fixed costs: Fixed overhead Fixed marketing and administrative expense Net income 2. Richards Corporation Statement of Income - Absorption Costing Sales Variable cost of goods sold: Materials Direct labor Variable overhead Fixed overhead Gross margin on sales Less: Fixed marketing and administrative expense Net income