Beach Corporation, which produces a single product, budgeted the following costs for its first year of
operations. These costs are based on a budgeted volume of 30,000 towels produced and sold:
During the first year of operations, Beach Towel actually produced 30,000 towels but only sold 24,000 towels.
Actual costs did not fluctuate from the cost behavior patterns described above. The 24,000 towels were sold for
$16 per towel. Assume that direct labor is a variable cost.
4. Under the absorption costing method, what is Beach Towel's actual net operating income for its first year?
5. Swifton Company produces a single product. Last year, the company had net operating income of $40,000
using variable costing. Beginning and ending inventories were 22,000 and 27,000 units, respectively. If the
fixed manufacturing overhead cost was $3.00 per unit, what was the income using absorption costing?