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Question
Peapod Company, a manufacturer of slippers, began operations on May 1 of the current year. During this time, the company produced 200,000 units and sold 180,000 units at a sales price of $36 per unit. Cost information for this period is shown in the following table:
| Production costs | |
| Direct materials | $4.00 per unit |
| Direct labor | $5.75 per unit |
| Variable overhead | $286,000 in total |
| Fixed overhead | $420,000 in total |
| Non-production costs | |
| Variable selling and administrative | $8,000 in total |
| Fixed selling and administrative | $30,000 in total |
a. Prepare Peapods December 31 income statement for the current year under absorption costing.
b. Prepare Peapods December 31 income statement for the current year under variable costing.
Answer
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