Production costs per case total $19, which consists of $15.50 in variable production costs and $3.50 in fixed production costs (based on the 16,000 units produced). Eight percent of total selling and administrative expenses are variable. Compute net income under variable costing.
Anchovy, Inc., a producer of frozen pizzas, began operations this year. During this year, the
company produced 16,000 cases of pizza and sold 15,000. At year-end, the company reported the following income statement using absorption costing:
Income under absorption costing = Income under variable costing + FOH in Ending
inventory — FOH in Beginning inventory
$356,000 = Income under variable costing ($3.50 x 0 units) + ($3.50 × 1,000 units) $352,500 = Income under variable costing
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