Vidal Corporation produces a single product.The following is a cost structure applied to its first year of operations.

Sales price $15 per unit

Variable costs:

SG&A $2 per unit

Production $4 per unit

Fixed costs (total cost incurred for the year):

SG&A $14,000

Production $20,000

During the first year,Vidal Corporation manufactured 5,000 units and sold 3,800.There was no beginning or ending work-in-process inventory. a. How much income before income taxeswould be reported if Vidal Corpor ation uses absorption costing b. How much income before income taxeswould be reported if variable conting was used? c. Show why the two costing methods give different income amounts.

Question

Vidal Corporation produces a single product.The following is a cost structure applied to its first year of operations.

Sales price	$15 per unit
Variable costs:
SG&A	$2 per unit
Production	$4 per unit
Fixed costs (total cost incurred for the year):
SG&A	$14,000
Production	$20,000

During the first year,Vidal Corporation manufactured 5,000 units and sold 3,800.There was no beginning or ending work-in-process inventory. a. How much income before income taxeswould be reported if Vidal Corpor ation uses absorption costing b. How much income before income taxeswould be reported if variable conting was used? c. Show why the two costing methods give different income amounts.

Quizplus · Accepted Answer

The Answer of Vidal Corporation produces a single product.The following is a cost structure applied to its first year of operations.

Sales price	$15 per unit
Variable costs:
SG&A	$2 per unit
Production	$4 per unit
Fixed costs (total cost incurred for the year):
SG&A	$14,000
Production	$20,000

During the first year,Vidal Corporation manufactured 5,000 units and sold 3,800.There was no beginning or ending work-in-process inventory. a. How much income before income taxeswould be reported if Vidal Corpor ation uses absorption costing b. How much income before income taxeswould be reported if variable conting was used? c. Show why the two costing methods give different income amounts.

Vidal Corporation Produces a Single Product