Williams Company Has Been Producing and Selling 100,000 Units Per

Essay

Williams Company has been producing and selling 100,000 units per year. They have excess capacity. The following budget was prepared for the next year: $\begin{array}{lc}\text { Selling price per unit } & \$ 1250 \\\text { Variable cost per unit: } & \\\text { Direct materials } & \$ 5.00 \\\text { Direct labor } & 3.00 \\\text { Overhead } & 1.00 \\\text { Selling and administrative } & 25\end{array}$ Fixed costs in total:
Overhead $\quad\quad\$ 80,000$
Sellingand administrative $\quad 35,000$ Required:
a. Prepare an income statement using the contribution approach.
b. Prepare an income statement using the absorption approach.