Reference no: EM132838580

Snowflake manufactures and sells a pump used in a wide variety of applications. During the coming year it expects to sell 30,000 units for $17.50 per unit. They are considering producing either 30,000 or 40,000 units during the period. Other information is presented in the schedule.

Snowflake Information - 2019
Beginning inventory 0
Expected sales in units 30,000
Selling price per unit $17.50
Variable manufacturing cost per unit $6.25
Fixed manufacturing overhead cost (total) $145,000
Selling and administrative expense (all fixed) $47,000

Instructions

Problem 1. Prepare variable costing and absorption income statements with one column showing the results if 30,000 units are produced, and one column showing the results if 40,000 units are produced.

Problem 2. Reconcile variable income and absorption income at production of 40,000 units.

Problem 3. Why is the income the same at 30,000 units under both absorption and variable costing