records of Bernon Co . for the month ended May 31 , XXXX . During the accounting period , 17,000 units were manufactured and sold at a price of $ 60 per unit . There were no beginning inventories . Bernon Co . Absorption Costing Income Statement for the Month Ended May 31 , XXXX Sales ( 17,000 @ $ 60 ) $ 1,020,000 Cost of goods sold 612,000 Gross profit $ 408,000 Selling and administrative expenses 66,000 Income from operations $ 342,000
Additional Information : Cost Total Cost Number of Units Unit Cost Manufacturing costs : Variable $ 442,000 17,000 $ 26 Fixed 170,000 17,000 10 Total $ 612,000 $ 36
Selling and administrative expenses : Variable ($ 2 per unit sold ) $ 34,000 Fixed 32,000 Total $ 66,000 Required : Prepare a new income statement for the year using variable costing . Comment on the differences , if any , between the absorption costing and the variable costing income statements . ( Points : 30 ) Question 2.2 . ( TCO I ) ( Ignore income taxes in this problem .) Simpson Beauty Products Corporation is considering the production of a new conditioning shampoo that will require the purchase of new mixing machinery . The machinery will cost $ 700,000 , is expected to have a useful life of 10 years , and is expected to have a salvage value of $ 70,000 at the end of 10 years . The machinery will also need a $ 45,000 overhaul at the end of Year 5 . A $ 60,000 increase in working capital will be needed for this investment project . The working capital will be released at the end of the 10 years . The new shampoo is expected to generate net cash inflows of $ 150,000 per year for each of the 10 years . Simpson ' s discount rate is 18 %.