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:
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.
Definitions:
Manufacturing Processes
The series of steps involved in the production of goods, from raw materials to finished products.
Plantwide Allocation Base
A single criterion, often direct labor hours or machine hours, used to allocate the total overhead of a plant to various products or cost objects.
Budgeted Units
The quantity of products or services that are planned to be sold or produced over a specific period, as per the budget.
Plantwide Factory Overhead Rate
A single overhead absorption rate used throughout a manufacturing plant, applied to all cost units irrespective of the department where they were produced.
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