Reference no: EM132846431
Question - Kelly's Burgers makes burger patties for large supermarket chains. The burgers are frozen and can last in storage for months. Cost information on the burgers is as follows:
Meat used for burgers $220,000
Wages used to make burgers 100,000
Overhead of the factory - variable 50,000 - fixed 70,000
Office staff 60,000
Sales staff 120,000
Kelly's salary 50,000
Kelly made 400,000 burgers this past year but only sold 375,000 to his customers. He sells them for $1.60 per burger patty. Kelly tells you that the office and sales staff are variable costs while his salary is fixed.
Required -
a) Calculate Kelly's income assuming he uses variable costing.
b) Calculate Kelly's income assuming he uses absorption costing.
c) Reconcile the differences each year in income from operations under the two costing approaches.
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