(Answered): Stark Corporation manufactures and sells a single product. Cost data for the product are given below…

Stark Corporation manufactures and sells a single product. Cost data for the product are given below:

Variable costs per unit:

Direct materials                                  $10

Direct labor                                        14

Variable manufacturing overhead       5

Variable selling and administrative     3

Total variable cost per unit                $32

Fixed costs per month:

Fixed manufacturing overhead          $600,000

Fixed selling and administrative       300,000

Total fixed cost per month                 $900,000

The product sells for $80 per unit. Production and sales data for August follow:

There was no beginning inventory.

Units               Units

Produced         Sold

August                                    25,000             20,000


(a)Determine the unit product cost under:

Absorption costing

Variable costing

Throughput costing

(b)Prepare a variable costing income statement for August.

(c)Prepare an absorption costing income statement for August.

(d)Explain why the operating income is different in parts (a) and (b).

Expert Answer



Variable costs per unit:
Direct materials 10
Direct labor 14
Variable factory overhead 5 $29.00
Variable selling & administrative 3
Total variable costs per unit $32.00
Fixed costs per month:
Fixed manufacturing overhead 600,000 $24
Fixed selling & administrative 300,000
Total fixed cost per month 900,000 $53
The product sells for $80 per unit. Production and sales data for august
Units Units
Produced Sold
august 25000 20000
Income statementsusing absorption costing,is presented below:
Sales 1600000
Cost of goods sold
Beginning inventory $0
Add cost of goods manufactured 1325000
Goods available for sale 1325000
Less ending inventory 265000 –
     Cost of goods sold 1060000
Gross margin 540000
Selling & administrative expenses 360000,
Operating income 180000
(a) The unit product cost under:
Absorption Variable
Costing Costing
Direct materials 10 10
Direct labor 14 14
Variable manufacturing overhead 5 5
Fixed manufacturing overhead ($600000/25,000) 24
production unit cost 53 29


Stark CorporationVariable Costing Income Statements
Sales (20,000 X $80) 1600,000
Variable expenses:
Variable cost of goods sold 580,000
Variable selling & administrative 60,000
    Total variable expenses 640000
Contribution margin 960,000
Fixed expenses:
Fixed manufacturing overhead $600,000
Fixed selling & administrative 300,000
     Total fixed expenses $900,000
Operating income 60000
When production is more than sales then the fixed manufacturing overhead is deferred in inventory that causes a higher net operating income under absorption costing than under variable costing.so the operating income is different in part a & b
Order NOW for a 10% Discount
Pages (550 words)
Approximate price: -

Why Us?

Top Quality and Well-Researched Papers

All ourbpapers are written from scratch. In fact, Clients who ask for paraphrasing services are highly discouraged. We have writers ready to craft any paper from scratch and deliver quality ahead of time.

Professional and Experienced Academic Writers

Our writers keeps you posted on your papers progress - providing you with paper outline/draft. You are also at liberty to communicate directly with your writer.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time, in many cases quite ahead of time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.

× Contact Live Agents