Using variable costing and absorption costing The chief executive officer of Button Corporation...

Using variable costing and absorption costing

The chief executive officer (CEO) of Button Corporation attended a conference in which one of the sessions was devoted to variable costing. The CEO was impressed by the presentation and has asked that the following data of Button Corporation be used to prepare comparative statements using variable costing and the company’s absorption costing. The data follow:

Direct materials	$90,000
Direct labor	120,000
Variable factory overhead	60,000
Fixed factory overhead	150,000
Fixed marketing and administrative expense	180,000

The factory produced 80,000 units during the period, and 70,000 units were sold for $700,000.

1. Prepare an income statement using variable costing.

2. Prepare an income statement using absorption costing. (Round unit costs to three decimal places.)