ACC 333 (Farrell)
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In-Class Activity – Should CableVision Serve Miranda?
Part 1 – Prepare Simple Absorption Costing and Variable Costing Income Statements
Assume that CableVision serves 30,000 subscribers in the Hamilton market each year, and charges each a sales
price of $20. Coincidentally, CableVision also used 30,000 subscribers as the denominator for its pre-determined
overhead rate for Hamilton.
Costs to serve these subscribers are as follows:
Expected and actual variable overhead
Expected and actual fixed overhead
Actual variable SG&A expenses
Actual fixed SG&A expenses
1) Using absorption costing, prepare an income statement for the year that includes total sales, cost of goods sold,
gross margin, and operating profit (loss).
Then, compute the per-subscriber sales, cost of goods sold, and
2) Using variable costing, prepare an income statement for the year that includes total sales, variable costs,
contribution margin, and operating profit (loss).
Then, compute the per-subscriber sales, variable costs, and