Reference no: EM132549037

Jackson Ltd had the following operating data for its first year of operation ending on 31 December 2019:

Units produced        60 000

Units sold               57 400

Selling price per unit $32

Variable costs per unit:

Direct materials $9.00

Direct labour $6.50

Variable manufacturing overhead $3.60

Variable selling expenses $3.00

Fixed costs per year:

Fixed manufacturing overhead $234,000

Fixed selling and administrative expenses $236,000

There are no work-in-process inventories. Normal production capacity is 60 000 units. Expected and actual overhead costs are the same.

Required:

Question 1: Construct an absorption costing income statement for Jackson Ltd for the year ending 31 December 2019.

Question 2: constuct a variable costing contribution margin statement for Jackson Ltd for the year ending 31 December 2019.

Question 3: Reconcile the differences between the profits under the two statements.

Question 4: Discuss two advantages and two disadvantages of using variable costing for internal reporting.