Accounting for Decision Making and Control 6th Edition by Jerold Zimmerman

Exercise 16

Auden Manufacturing produces a single product with the following standards:

FIFO inventory costing is used. Normal volume is used as budgeted volume. Actual production, sales, and costs for the year were as follows:

Required:
a. Compute the overhead rate used to apply overhead to the product.
b. Calculate all variances.
c. Calculate net income under absorption costing. (All variances are taken to cost of goods sold.)
d. Calculate net income under variable costing. (All variances are taken to cost of goods sold.)
e. Reconcile the difference in income between variable costing and absorption costing.