Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 42

Full versus Variable Costing Stultz Manufacturing has the following information for the years ended December 31, 2009, and December 31, 2010:

	2009	2010
Units
Beginning inventory (units)	400
Price	$90	$90
Units sold	1,000	1,900
Actual production (units)	1,200	1,500
Budgeted production (units)	1,200	1,500
Unit variable costs
Manufacturing	$30	$30
Selling and administrative	$5	$5
Fixed costs
Manufacturing	$24,000	$30,000
Selling and administrative	$10,000	$10,000

Required

1. Prepare the variable-cost and full-cost income statements for 2009 and 2010.

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2. Prepare a reconciliation and explanation for the differences between full-cost and variable-cost operating income for both years.

Step 1 of 4

Fixed cost is the portion of total cost which does not changes with change in level of production. Variable cost is the portion of total cost which changes with change in level of production.