Variable costing and absorption costing?

1. Please provide general discussion on variable costing with inline citations, and supporting with the example below

Unit price $500 Variable Costing Income Statement
Unit Direct materials $100 sales $700,000
Unit direct labor $80 variable costs
Unit Indirect materials $50 Direct materials $140,000
Unit indirect labor $40 Direct labor $112,000
Unit variable selling and admin $20 Indirect materials $70,000
Fixed over head $10,000 Iniderct labor $56,000
Fixed selling and admin $80,000 Variable selling and admin $28,000
Units sold 1400 $406,000
CM $294,000
Fixed costs
Fixed overhead $10,000
Fixed selling and admin $80,000
$90,000
Operating income $204,000

2. Please provide general discussion on Absorption costing income statement and its difference from variable costing format provide inline citation. Include the example below.

Unit Price $400
unit direct materials $40
Unit diirect labor $40
unit indirect material $10
unit indirect labour $5
unit variable selling and admin $12
fixed overhead $100,000
fixed selling and admin $50,000
Period 1 Period 2
units sold 60000 40000
units manufactured 80000 20000
note: all units manufactured should be sold at the end of period 2
So if we do income statement right the sum of the incomes in the two periods will be the same in both formats, Despite monthly incomes being different as shown below.
fixed over head absorbed in each unit manufactured in period 1 $1.25
fixed over head absorbed in each unit manufactured in period 2 $5
Variable Costing Format Absorption Costing Format
period 1 period 2 period 1 period 2
Sales $24,000,000 $16,000,000 Sales $ 24,000,000 $ 16,000,000
variable costs variable costs
direct Materials $2,400,000 $1,600,000 direct Materials $ 2,400,000 $ 1,600,000
direct labour $2,400,000 $1,600,000 direct labour $ 2,400,000 $ 1,600,000
indirect materials $600,000 $400,000 indirect materials $ 600,000 $ 400,000
indirect labour $300,000 $200,000 indirect labour $ 300,000 $ 200,000
variable selling and admin $720,000 $480,000 fixed overhead $ 75,000 $ 125,000
variable costs $6,420,000 $4,280,000 Manufacturing Cost $ 5,775,000 $ 3,925,000
CM $17,580,000 $11,720,000 Gross Margin $ 18,225,000 $ 12,075,000
Fixed Cost Selling & Admin Cost
fixed over head $100,000 $100,000 Variable selling $ admin $720,000 $480,000
fixed selling and admin $50,000 $50,000 Fixed selling & admin $50,000 $50,000
total fixed costs $150,000 $150,000 Selling & admin Cost $770,000 $530,000
operating income $17,430,000 $11,570,000 Operating Income $17,455,000 $11,545,000
$29,000,000 $29,000,000
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