Reference no: EM132059836

Question - Absorption and Variable Costing Income Statements: Production Exceeds Sales

Glendale Company sells its product at a unit price of $12.00. Unit manufacturing costs are direct materials, $2.00; direct labor, $3.00; and variable manufacturing overhead, $1.50. Total fixed manufacturing costs are $22,500 per year. Selling and administrative expenses are $1.00 per unit variable and $10,000 per year fixed. Though 25,000 units were produced during 2009, only 17,000 units were sold. There was no beginning inventory.

(a) Prepare a functional income statement using absorption costing.

(b) Prepare a contribution income statement using variable costing.