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:

Reciprocal Dealing Agreement

An agreement between two parties where each agrees to purchase goods or services from the other, often used to strengthen business relationships.

Exclusive Dealing

An arrangement where a retailer or distributor is restricted to purchasing or selling the products of one supplier.

Wholly Owned

A company or entity that is 100% owned by another company or individual.

Vertical Boycott

An anti-competitive practice where companies at different supply chain levels agree not to deal with a particular company or group.