Cooley company has the following information:
Variable production costs ----------------- $ 8 per unit
Fixed OH Producation costs ------------ $120,000 per year
Variable selling & admin. ------------------- $4 per unit
Fixed selling & admin. ------------------------ $60,000 per year
Normal production ----------------------------- 20,000 units per year
The company uses the FIFO inventory method. 2011 was the first year of operation year
| year |
Budgeted units to produce |
Actual units produce |
Actual units sold |
| 2011 |
20,000 |
16,000 |
14,000 |
| 2012 |
16,000 |
25,000 |
22,000 |
| 2013 |
19,000 |
15,000 |
19,000 |
Question1: if income under absorption costing for year 2013 is $50,000, what was the 2013 net income under the variable costing method assuming that overhead was applied to production using a rate based on normal production?
Question 2: if income under variable costing for year 2012 is $40,000, what was the 2012 net income under the absorption costing method assuming that overhead was applied to production using a rate based on budgeted producation for each year? (note: this neans that each year will have a different budgeted overhead application rate?