Reference no: EM132530012

Byrd Company manufactures a single product. The following simplified data are related to its two years of operations:

Particulars                                                                          Year 1                             Year 2

Units sold @ Rs.                                                      20 40,000                     30,000

Standard variable cost of production per unit (Rs.)                 8                          8

Fixed Factory overhead cost (Rs.)                                    2,00,000                  2,00,000

Selling & Distribution Expenses (assumed to be fixed) (Rs.)     1,40,000                  1,40,000

Standard Fixed factory overheads per unit (Rs.)                            5                          5

Units produced                                                                     30,000                    50,000

Opening finished goods Inventory-Units                                           10,000                             -

Required:

Question a) Prepare income statements based on:

i. Absorption costing and

ii. Variable costing for each year

Question b) Give reasons for the difference in the answer.