Radlin Inc. has just completed its first year of operations. The unit costs on a normal costing basis are as follows:
__________________________________________________________________ Actual fixed overhead was $170,000 for the year and actual variable overhead was $72,000. Budgeted fixed overhead was $180,000 and the company used an expected activity level of 40,000 direct labour hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.
a. Compute the unit cost under:
(i) absorption costing
(ii) variable costing
b. Prepare an absorption-costing income statement.
c. Prepare a variable-costing income statement.
d. Reconcile the difference between the two income statements.

Question

Radlin Inc. has just completed its first year of operations. The unit costs on a normal costing basis are as follows:
__________________________________________________________________  Actual fixed overhead was $170,000 for the year and actual variable overhead was $72,000. Budgeted fixed overhead was $180,000 and the company used an expected activity level of 40,000 direct labour hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.
a. Compute the unit cost under:
(i) absorption costing
(ii) variable costing
b. Prepare an absorption-costing income statement.
c. Prepare a variable-costing income statement.
d. Reconcile the difference between the two income statements.

Quizplus · Accepted Answer

The Answer of Radlin Inc. has just completed its first year of operations. The unit costs on a normal costing basis are as follows:
__________________________________________________________________  Actual fixed overhead was $170,000 for the year and actual variable overhead was $72,000. Budgeted fixed overhead was $180,000 and the company used an expected activity level of 40,000 direct labour hours to compute the predetermined overhead rates. Any overhead variances are closed to Cost of Goods Sold.
a. Compute the unit cost under:
(i) absorption costing
(ii) variable costing
b. Prepare an absorption-costing income statement.
c. Prepare a variable-costing income statement.
d. Reconcile the difference between the two income statements.