MAnagerial accounting
The Bailey’s Corporation uses absorption costing for its external financial statements. Managers believe the Income Statements are confusing, because they conflict with their “instincts” about profitability. The controller suggests that the organization use variable costing because it may give managers better information, especially for decisions about operations. The following information was pulled from last year’s publicly available Income Statement as well as internal records.
Data alternative 2
Cost per unit: $40 DM, $30 DL, $10 Variable OH
Fixed OH: $150,000
Number of units: 15,000 produced and 12,000 sold
Sales price per unit $200
Fixed selling and administrative costs $600,000
Variable selling and administrative costs $5 per unit
Requirements:
a) Use absorption costing. Find the unit cost and prepare an income statement.
b) Use variable costing. Find the unit cost and prepare an income statement.
c) Use super-variable costing. Find the unit cost and prepare an income statement.
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