ACC 206 Week 3 Chapter 5 Problem 6 Direct and absorption costing

Chapter 5 Problem 6: Direct and absorption costing 

The information that follows pertains to Consumer Products for the year ended December 31, 19X6.

Fixed factory overhead          $280,000

Selling & administrative expenses:

Variable          $2 per unit

Fixed  $136,000

The unit selling price is $26. Assume that costs have been stable in recent years.

Instructions:

1. a.       Compute the number of units in the ending inventory.
2. b.      Calculate the cost of a unit assuming use of:
   1. 1.      Direct costing.
   2. 2.      Absorption costing.
3. c.       Prepare an income statement for the year ended December 31, 20X6, by using direct costing.
4. d.      Prepare an income statement for the year ended December 31, 20X6, by using absorption costing.