Reference no: EM132554555

Company XYZ produces and sells 1 million units of car parts. The total manufacturing cost of making 1million car parts is $30 million.

Company XYZ has the following cost:

Direct materials $ 14 million

Direct labour cost $6 million

The company incurs indirect manufacturing costs of

Variable $4 million

Fixed $6 million

Additionally the company incurred selling and administrative expenses as follows:

Selling expenses: Variable $2 million

Fixed $ 4 million

Administrative expenses: Variable $200,000

Fixed $ 1.8 million

There were no opening and closing inventory; and total sales is are predicted at $40 million

a. Required :

Question i) Prepare marginal and absorption income statements.

Question ii) Compare the two statements and the relevance for decision making.