Answer:
Difference in case variable costing is used then absorption = $110,000 - $114,000 = - $4,000
That is profit will be less by $4,000
Explanation:
Total Profit as per Variable Costing
Cost of goods manufactured = $4 12,000 = $48,000
Fixed Cost = $24,000
Variable Selling Expense = $2 10,000 = $20,000
Fixed Selling And Administrative = $6,000
Total cost of manufacturing of 10,000 units = $40,000 + $24,000 = $64,000
Total Selling & Administrative = $20,000 + $6,000 = $26,000
Total cost = $64,000 + $26,000 = $90,000
Revenue = $20 10,000 = $200,000
Profit = $200,000 - $90,000 = $110,000
Profit As Per Absorption Costing
Cost of goods sold
Variable manufacturing = $4 10,000 = $40,000
Fixed Cost of manufacturing = $24,000/12,000 10,000 = $20,000
Variable Selling Expense = $2 10,000 = $20,000
Fixed Selling & Administrative = $6,000
Total = $40,000 + $20,000 + $20,000 + $6,000 = $86,000
Profit = $200,000 - $86,000 = $114,000
Difference in case variable costing is used then absorption = $110,000 - $114,000 = - $4,000
That is profit will be less by $4,000