The Following Information Is Available for the Crossover Company

question 139

Essay

The following information is available for the Crossover Company:
Sales: 25,000 units per year at $45 per unit
Production: 30,000 units in 2019 and 20,000 units in 2020
At the beginning of 2019 there was no inventory
Variable manufacturing costs are $30.00 per unit
Fixed manufacturing costs are $150,000 per year
Marketing costs are all fixed at $75,000 per year
Required:
(a) Prepare a gross margin income statement under absorption costing for 2019 and 2020. Include a column for each year and a total column.
(b) Prepare a contribution margin income statement under variable costing for 2019 and 2020. Include a column for each year and a total column.
(c) Comment on the results and reconcile any differences in income.

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Definitions:

ROM

Read-Only Memory, a type of non-volatile storage medium that is programmed with permanent data and instructions that cannot be modified.

Secondary Storage Medium

Non-volatile storage that is not directly accessible by the computer's CPU, such as hard drives, SSDs, or magnetic tape.

Magnetic Tapes

A data storage medium that uses a magnetizable coating on a long, narrow strip of plastic film to record audio, video, or data.

Capacity

The maximum amount that something can contain or produce, often referring to businesses or production facilities.