Variable / Absorption Costing

After our first year at Peloton, COVID hits, and all of our prior cost assumptions are tossed to the side. We recalculate all of the costs and have the following:

Direct Materials $750 / bike

Direct Labor $500 / bike

Variable Overhead $150 / bike

Fixed Overhead $600,000 for the year

Variable S,G &A $20,000

Fixed S,G &A $25,000

Units Produced 5,000 bikes

Units Sold 4,000 bikes

a-Use the information above. We sell each bike for $2,500. Prepare an income statement according to the absorption costing concept. Note: Take the Variable S,G &A expenses in total,

b-Use the information above. We sell each bike for $2,500. Prepare an income statement according to the variable costing concept. Note: Take the Variable S,G &A expenses in total