To illustrate the effects of direct costing for external uses.assume that the normal capacity of a plant of a plant is 20000 units per month,or 240000 units a year.variable cost per unite are :direct material $3:direct labor,$2.25: and variable factory overhead,$.75-a total of $6.Fixed factory overhead is $300000 per year.25000 per month,or$1.25 per unit at normal capacity.the units of production is used for applying overhead .fixed marketing and administrative expenses are $5000 per month ,or $60000 a year;and variable marketing and administrative expenses are $3400, $3600,$4000, and $3000 for the first, second ,third, forth months ,respectively
The sales price per unit $10, and actual production,sales and finished goods inventories in units are :
first second third forth
month month month month
Units in beginning inventory... 3000 1000
Units produced... 17500 21000 19000 20000
Units sold... 17500 18000 21000 45000
Units in ending inventory... 3000 1000 4500
Make income statement under absorption costing
Make income statement under direct costing
In this solution my problem is that in ans of 2nd mnth of income statement under absorption costing at the point of ending inventory 21750 how this amount comes