Rey Company’s only product sells for $216 per unit. Data for its first year of operations follow. Direct materials$ 20per unitDirect labor$ 28per unitVariable overhead$ 6per unitFixed overhead$ 160,000per yearVariable selling and administrative expenses$ 18per unitFixed selling and administrative expenses$ 200,000per yearUnits produced and sold20,000units 1. Prepare an income statement for the year using absorption costing2. Prepare an income statement for the year using variable costing.

Absorption costing system is more logical than variable costing system. In absorption costing fixed…

Answered: Rey Company’s only product sells for…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 22E: Ellerson Company provided the following information for the last calendar year: During the year,...

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Rey Company’s only product sells for $216 per unit. Data for its first year of operations follow.

Direct materials	$ 20	per unit
Direct labor	$ 28	per unit
Variable overhead	$ 6	per unit
Fixed overhead	$ 160,000	per year
Variable selling and administrative expenses	$ 18	per unit
Fixed selling and administrative expenses	$ 200,000	per year
Units produced and sold	20,000	units

1. Prepare an income statement for the year using absorption costing
2. Prepare an income statement for the year using variable costing.

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