How much income before income taxes would be reported if

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Reference no: EM13597257

Stanley 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:

Selling, general & admin $2 per unit
Production $4 per unit

Fixed costs (total incurred for the year):

Selling, general & admin $14,000
Production $20,000

During the first year, the company manufactured 5,000 units and sold 3,800 units.
a. How much income before income taxes would be reported if Stanley uses absorption costing? Please show your income statement in proper form.

b. How much income before income taxes would be reported if variable costing was used? Please show your income statement in proper form.

c. Show why the two costing methods give different income amounts. (Show your answer in units and dollar amounts.)

Reference no: EM13597257

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