BT Co, a beverage manufacturer, manufactures one product.
BT accounts for its Finished Goods Inventory using FIFO. It incurs direct materials costs of $0.50 per unit
produced. The line workers are paid (in total) $100 per hour.
BT pays its plant supervisors based in part on salary and in part on the number of units produced in a
month. The information for the last seven months of supervisors’ salaries is as follows:
Month Total Pay Units Produced
Dec X1 $45,000 2,500,000
Jan X1 49,100 2,700,000
Feb X1 42,000 2,300,000
Mar X1 39,100 1,700,000
AprX1 48,000 2,600,000
May X1 44,000 2,400,000
June X1 41,100 1,900,000
For the month ended 6/30/X1, BT sold 1,800,000 units at $2.00 per unit
Other information for the month of June X1:
Fixed Manufacturing Costs (other than Supervisor’s Salary) $357,900
Fixed Selling & Administration Costs $60,000
Variable Selling & Administration Costs $0.30 per unit
At 5/31/X1, there were 100,000 units in Ending Inventory. Variable Costing 5/31 Ending Inventory was
$60,000. Absorption Costing 5/31 Ending Inventory was $81,000.
For the month ended 6/30/X1, there were 1,531 of direct labor hours incurred
How would I begin creating a variable costing income statement and absorption statement?
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