Castaway Company Reports the Following First Year Production Cost Information

question 32

Essay

Castaway Company reports the following first year production cost information:
$$\begin{array} { l l } \text { Units produced } & 53,000 \mathrm { units } \\\text { Units sold } & 51,000 \mathrm { units } \\\text { Sales price } & \$ 150 \mathrm { per } \text { unit } \\\text { Direct labor } & \$ 8 \mathrm { per } \text { unit } \\\text { Direct materials } & \$ 4 \text { per unit } \\\text { Variable overhead } & \$ 2,173,000 \text { in total } \\\text { Fixed overhead } & \$ 3,339,000 \text { in total } \\\text { Operating expenses } & \$ 1,000,000 \text { in total }\end{array}$$
a.Determine the net income using variable costing.
b.Determine the net income using absorption costing.

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Definitions:

M1

A category of the money supply that includes physical currency and coin, demand deposits, traveler's checks, and other checkable deposits.

Travelers Checks

Pre-printed, fixed-amount checks designed to allow the person signing them to make an unconditional payment to someone else as a result of having paid the issuer for that privilege.

Reserve Ratio

The fraction of deposits that banks are required to keep on hand as reserves, either in their vaults or with the central bank, to ensure liquidity.

Goldsmith's Receipts

Goldsmith's Receipts were historically issued by goldsmiths in the form of promissory notes against the gold deposited with them, leading to the development of banking.