- Problem 1 Inventory Costing Part A In The Beginning Year Of 2022 Aice Ice Cream Uses Overhead Rate Based On Normal Ca 1 (95.76 KiB) Viewed 41 times
Problem 1 - Inventory Costing PART A In the beginning year of 2022, AICE Ice Cream uses overhead rate based on normal capacity which shown in units of output. The company predicts that normal capacity is 7500 units, and the expected fixed overhead cost for the year is $30,000. During the year, AICE produced 7400 units and sold 7200 units. Assume that no beginning finished goods inventory. The variable-costing income statement for the year follows: Sales (7200 units @ $21) 151,200 Less variable costs: Variable cost of goods sold (75,600) Variable selling expenses (36,000) Contribution margin 39,600 Less fixed costs: Fixed overhead (30,000) Fixed selling and administrative (8400) Operating income 1200 If there is any under- or overapplied overhead will be closed to Cost of Goods Sold. Variable cost of goods sold is already adjusted for any variable overhead variance. Required: 1. AICE Ice Cream needs an income statement based on absorption costing for reporting. Using the information provided, prepare this statement. 2. Explain the difference between the income reported by variable costing and by absorption costing.