a.

Assume that the company is following Absorption costing then prepare

1) Income statement
Solution
Income statement (Absorption costing)

b. Assume company follow variable costing then prepare

3. Unit product cost.

Solution
Unit Product cost using variable costing

4. Income statement variable costing.

c. Reconcile the net operating income of absorption costing with net operating income of
variable costing.

Solution:

c.The difference between NOI (absorption costing) and NOI (variable costing) is due the reason
that unit produced are not equal to unit sold (FOMH hidden in ending inventory units).
Unit produced= 20,000

Practice Question no.2