Preferred Products has the following cost information available for 2009:
Direct Materials $4.00 per unit
Direct Labor $3.00 per unit
Variable manufacturing overhead $2.00 per unit
Variable selling and administrative costs $1.00 per unit
Fixed manufacturing overhead $25,000
Fixed selling and administrative costs $10,000
During 2009, Preferred produced 5,000 units out of which 4,600 units were sold for $30 each.
A. Calculate Preferred’s net income assuming the company uses variable costing.
B. Calculate Preferred’s net income assuming the company uses absorption costing.