Chapter 6, Problem 13PA

Grainger Company produces only one product and sells that product for $100 per unit. Cost information for the product is:

Selling expenses are $4 per unit and are all variable. Administrative expenses of $20,000 are all fixed. Grainger produced 5,000 units; sold 4,000; and had no beginning inventory.

A. Compute net income under

1. absorption costing
2. variable costing

B. Reconcile the difference between the income under absorption and variable costing.