MT425:Prepare an income statement using variable costing.
MT425 / MT 425
Managerial Finance and Accounting
Kaplan
University (KU Campus)
James Jiambalvo
Managerial Accounting,
4e
Hoboken, NJ: John Wiley & Sons.
Unit 4: Cost Measurement for Management
Chapter 5
Problem 5-17 Variable and Full Costing Income: Comprehensive Problem [LO
1, 2, 3] The following information relates to Jorgensen Manufacturing for
calendar year 2011, the companyâs first year of operation:
Units produced
8,000
Units sold 7,000
Selling price per unit $4,500
Direct material
per unit $2,000
Direct labor per unit $1,200
Variable manufacturing
overhead per unit $900
Variable selling cost per unit $225
Annual fixed
manufacturing overhead $800,000
Annual fixed selling and administrative
expense $400,000
Required
a. Prepare an income statement using full
costing.
b. Prepare an income statement using variable costing.
c.
Calculate the amount of fixed manufacturing overhead that will be included in
ending inventory under full costing and reconcile it to the difference between
income computed under variable and full costing.
d. Suppose that the company
sold 8,000 units during the year. What would the variable costing net income
have been? What would the full costing net income have been?
