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Farris Corporation produces a single product. The following is a cost structure applied to its first year of operations. Sales price $15 per unit Variable costs: SG&A $2 per unit Production $4 per unit Fixed costs (total cost incurred for the year): SG&A $14,000 Production $20,000 During the first year, Farris Corporation manufactured 5,000 units and sold 3,800. There was no beginning or ending work-in-process inventory.
a. How much income before income taxes would be reported if Farris Corporation uses absorption costing?
b. How much income before income taxes would be reported if variable costing was used?
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