Item 3 10 points
Sims Company, a manufacturer of tablet computers, began operations on January 1, 2019. Its cost and sales information for this year follows.
| Manufacturing costs | |||
| Direct materials | $ | 40 | per unit |
| Direct labor | $ | 60 | per unit |
| Overhead costs | |||
| Variable | $ | 30 | per unit |
| Fixed | $ | 7,000,000 | (per year) |
| Selling and administrative costs for the year | |||
| Variable | $ | 770,000 | |
| Fixed | $ | 4,250,000 | |
| Production and sales for the year | |||
| Units produced | 100,000 | units | |
| Units sold | 70,000 | units | |
| Sales price per unit | $ | 350 | per unit |
1. Prepare an income statement for the year using variable costing.
2. Prepare an income statement for the year using absorption costing.
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