Variable vs. Absorption Costing $ 50.00 No Video for this worksheet Selling price per unit Manufacturing costs Variable per unit produced: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead per year $ 11.00 REQUIRED: Calculate the unit cost and prepare a traditional 6.00 $ 3.00 120,000 Selling and administrative expenses Variable per unit sold Fixed per year $ 4.00 70,000 Year 1 Units in beginning inventory Units produced during the year Units sold during the year Units in ending inventory Year 2 0 2,000 10,000 8,000 8,000 10,000 2,0000 Compute the Absorption Costing Unit Product Cost Compute the Variable Costing Unit Product Cost $ Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Absorption costing unit product cost Year 1 11.00 $ 6.00 3.00 12.00 32.00 $ Year 2 11.00 6.00 3.00 15.00 35.00 Direct materials Direct labor Variable manufacturing overhead Variable costing unit product cost Year 1 11.00 $ 6.00 3.00 20.00 $ Year 2 11.00 6.00 3.00 20.00 $ $ Construct the Absorption Costing Income Statement Construct the Variable Costing Income Statement $ $ Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Year 1 400,000 $ 256,000 144,000 $ 102,000 42,000 $ Year 2 500,000 344,000 156,000 110,000 46,000 $ Sales Cost of goods sold Gross margin Selling and administrative expenses Net operating income Year 1 400,000 $ 280,000 120,000 $ 102,000 18,000 $ Year 2 500,000 320,000 180,000 110,000 70,000 $ $ $ Value of ending inventory $ 64,000 $ . Value of ending inventory $ 40,000 $ . We either allocate costs to COGS or ending How much higher is year 1 NOI under absorption costing? How much higher is the value of ending inventory? $ $ 24,000 24,000 Why is the year 1 net income higher under absorption costing? What is the total two year net income under absorption costing? $ 88,000 What is the total two year net income under variable costing? $ 88,000