Reference no: EM133125485

Question - The Renfroe Company uses a standard costing system. Denominator volume for the years 20x8 and 20x9 was 200,000 units per year. The fixed overhead volume variance is expensed to cost of goods sold at the end of the year.

The following are actual data for the year 20x9:

Sales 235,000 units

Opening inventory 50,000 units

Ending inventory 20,000 units

Selling price $60

Variable costs per unit (at standard) -

Manufacturing $15

Selling and administrative $6

Fixed costs (in total) -

Manufacturing $4,000,000

Selling and administrative 1,500,000

All actual costs were equal to budgeted costs. The standard costs have not changed since the beginning of 20x8.

Required -

a. Prepare an income statement in proper form using absorption costing.

b. Prepare an income statement in proper form using variable/direct costing.

c. Reconcile the difference.