Ziemble Agency makes use of a predetermined overhead cost based on common functionality expressed in fashions of output. Common functionality is 75,000 fashions, and the anticipated mounted overhead value for the 12 months is $300,000.
By way of the 12 months, Ziemble produced 74,000 fashions and provided 72,000 fashions. There was no beginning accomplished gadgets inventory. The variable-costing earnings assertion for the 12 months follows:
Product sales (72,000 fashions @ $21) $1,512,000 A lot much less variable costs:
Variable value of merchandise provided (756,000)
Variable selling payments (360,000)
Contribution margin $ 396,000 A lot much less mounted costs:
Fixed overhead (300,000)
Fixed selling and administrative (84,000) Working earnings $ 12,000
Any under- or overapplied overhead is closed to Value of Objects Purchased. Variable value of merchandise provided is already adjusted for any variable overhead variance.
1. Ziemble Agency needs an earnings assertion based on absorption costing for exterior reporting. Using the info equipped, put collectively this assertion.
2. Make clear the excellence between the earnings reported by variable costing and by absorption costing.