SBW Corporation planned to be in operation for three years.
∙ During the first year,2016,it had no sales but incurred $120 000 in variable manufacturing expenses and $40 000 in fixed manufacturing expenses.
∙ In 2017,it sold half of the finished goods inventory from 2016 for $100 000 but it had no manufacturing costs.
∙ In 2018,it sold the remainder of the inventory for $120 000,had no manufacturing expenses and went out of business.
∙ Marketing and administrative expenses were fixed and totalled $20 000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.
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Question

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The Answer of SBW Corporation planned to be in operation for three years.
∙ During the first year,2016,it had no sales but incurred $120 000 in variable manufacturing expenses and $40 000 in fixed manufacturing expenses.
∙ In 2017,it sold half of the finished goods inventory from 2016 for $100 000 but it had no manufacturing costs.
∙ In 2018,it sold the remainder of the inventory for $120 000,had no manufacturing expenses and went out of business.
∙ Marketing and administrative expenses were fixed and totalled $20 000 each year.
Required:
a.Prepare an income statement for each year using absorption costing.
b.Prepare an income statement for each year using variable costing.
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SBW Corporation Planned to Be in Operation for Three Years