Question

Figure 8-7. Ramon Company reported the following units of production and sales for June and July:...

Figure 8-7.
Ramon Company reported the following units of production and sales for June and July:

Units

Month

Produced

Sold

June

100,000

90,000

July

100,000

105,000

Income under absorption costing for June was $40,000; income under variable costing for July was $50,000. Fixed costs were $600,000 for each month.

7. Refer to Figure 8-7. How much was income for July using absorption costing?

a.

$50,000

b.

$20,000

c.

$80,000

d.

$40,000

8. Refer to Figure 8-7. How much was income for June using variable costing?

a.

$40,000

b.

$20,000

c.

$(40,000)

d.

$(20,000)
Business   Accounting   
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Answer #1

1

Income for July using absorption costing

Fixed cost

600000

Unit of production

100000

Per unit fix cost (fixed cost/normal production)

6

(600000/100000)

Income under variable costing

50000

Less: fix expenses (5000*6)

30000

Income under absorption costing for july

20000

Answer: B. $20000

2

Income for June using variable costing

Per unit fix cost (fixed cost/normal production)

6

(600000/100000)

Income under absorption costing

40000

Absorption costing is higher by (10000*6)

60000

Loss=

20000

Answer : D.$(20000)
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