133) Hopson Manufacturing uses an actual cost system for product costing. The company’s income statement for 2006 is presented below:
HOPSON MANUFACTURING COMPANY
FOR THE YEAR ENDED DECEMBER 31, 2006
Sales (10,000 units @ $20)$200,000
Cost of Goods Sold:
Finished Goods Inventory, January 1 $- 0 –
Cost of Goods Manufactured
(12,000 units @ $15)180,000
Goods Available for Sale180,000
Finished Goods Inventory, December 31
(2,000 units @ $15) 30,000150,000
Gross Margin$ 50,000
Administrative 20,000 40,000
The following additional information is available:
Variable costs per unit:
Fixed costs for the period:
a. When absorption costing was used, how much fixed manufacturing overhead was deferred in finished goods inventory?
b. Recast the income statement for 2006 using variable costing.
c. Reconcile variable costing income and absorption costing income.