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ACC 206 Week 3 Chapter 5 Problem 6 Direct and absorption costing

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Chapter 5 Problem 6: Direct and absorption costing 
The information that follows pertains to Consumer Products for the year ended December 31, 19X6. 
 
Inventory, 1/1/X6 
24,000 units 
Units manufactured 
80,000
Units sold 
82,000
Inventory, 12/31/X6 
Manufacturing costs: 
? units 
Direct materials 
$3 per unit 
Direct labor 
$5 per unit 
Variable factory overhead 
$9 per unit 
Fixed factory overhead          $280,000 
Selling & administrative expenses: 
Variable          $2 per unit 
Fixed  $136,000 
 
The unit selling price is $26. Assume that costs have been stable in recent years.
 
Instructions:
  1. a.       Compute the number of units in the ending inventory.
  2. b.      Calculate the cost of a unit assuming use of:
    1. 1.      Direct costing.
    2. 2.      Absorption costing.
  3. c.       Prepare an income statement for the year ended December 31, 20X6, by using direct costing.
  4. d.      Prepare an income statement for the year ended December 31, 20X6, by using absorption costing. 

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