Absorption Costing | Variable Costing | Exam Based Q&A | Brief | Descriptive | Analytical

 

 

Absorption Costing and Variable Costing Exam Based Questions and Answers

It includes Brief Question, Descriptive Questions  and Analytical Questions with answers in details

  

 

Absorption Costing | External Costing | Traditional Costing

Absorption costing is a traditional costing system.

It is also called full absorption, conventional costing or traditional costing and external costing.

It includes variable cost and fixed cost manufacturing.

Absorption costing includes direct materials, direct labour, variable manufacturing cost and fixed manufacturing cost in product cost.

It includes administrative cost, selling and distribution cost in period cost.

But it does not include fixed manufacturing cost in period cost.

 

The main object of the business company is to earn more and more profit.

Success or failure of the company is depended on profit.

The income statement measures profit or loss of the company.

There are two types of methods to find out profit and loss from income statement.

Absorption costing and variable costing are two methods to prepare income statement.

Absorption costing is suitable for internal as well as external users but variable costing is suitable for internal users with management decision.

 

Direct materials, direct labour, variable manufacturing cost and fixed manufacturing cost = Production units × Cost per unit

Period cost under absorption costing              = Administrative cost + Selling and distribution cost

Total variable, selling and distribution cost    = Sales units × Cost per unit

 

Income Statement under Absorption Costing

For ….. units

Particulars			Amount
Sales Revenue                                            (sales units @ $)			xxxx
(A)			xxxx
Manufacturing cost:
	Direct materials                              (production units @ $)
	Direct labour                                   (production units @ $)
	Variable production overhead   (production units @ $)
	Fixed production cost                   (production units @ $*)
	Total manufacturing cost or Cost of production		xxxx
Add:	Beginning inventory                      (opening stock @ $)		xxxx
Less:	Ending inventory                            (closing stock @ $)		(xxx)
	COGS before adjustment		xxxx
Add:	Under absorption# manufacturing cost           (compare with actual)		xxxx
Less:	Over absorption manufacturing cost               (compare with actual)		(xxx)
	COGS after adjustment (B)		xxxx
	Gross profit (A–B)		xxxx
Less:	Variable administrative cost       (production units x $)	xxxx
	Variable S&D cost                         (sales units x $)	xxxx
Less:	Fixed administrative cost             (production units x $)	xxxx
	Fixed S & D  cost                             (sales units x $)	xxxx	xxxx
Net Income			$xxxx

 

Fixed cost per unit (FCPU*) = Fixed manufacturing cost ÷ Normal output

Either over absorption^# or under absorption

 

 

Variable Costing | Internal Costing | Direct Costing

Variable costing is also known as internal costing, direct costing and marginal costing.

Variable cost helps to administrator to solve the problem about production planning.

Under this method, production cost is calculated on variable basis.

Variable costing includes direct materials, direct labour and variable manufacturing cost in product cost.

It includes fixed manufacturing cost, administrative, selling and distribution cost in period cost.

 

Direct materials, direct labour, variable manufacturing cost:

= Production units x Cost per unit

 

Period costing under variable costing  = Fixed manufacturing cost + Administrative cost + S&D cost

Total variable, selling and distribution cost    = Sales units × Cost per unit

Sold units      = Opening stock + Production – Closing stock

 

Income Statement under Variable Costing

Particulars				Amount $
Sales revenue          (sales units @ $)				xxxx
(A)				xxxx
Variable cost:
	Direct materials	(production units @ $)		xxxx
	Direct labour	(production units @ $)		xxxx
	Variable production overhead	(production units @ $)		xxxx
		Total variable cost or Cost of production		xxxx
Add:	Beginning inventory	(opening stock @ $)		xxxx
Less:	Ending inventory	(closing stock @ $)		xxxx
		COGS (B)		xxxx
		Gross contribution (A – B)		xxxx
Less:	Variable administrative cost	(production units x $)		xxxx
Less:	Variable S&D cost	(sales units x $)		xxxx
		Net contribution		xxxx
Less:	Fixed production cost	( ± absorption, if any)	xxxx
Fixed administrative cost		(production units x $)	xxxx
Fixed S&D cost		(sales units x $)	xxxx
Net Income				$xxxx

 

Note:             If there is under absorption in absorption costing, it is added with fixed manufacturing cost in variable costing

If there is over absorption in absorption costing, it is deducted from fixed manufacturing cost in variable costing

 

 

Reconciliation of Difference in Net Cost

If there is no difference in the size of opening stock and closing stock, in such a condition net income of absorption costing and variance costing is same.

The difference between opening stock, closing stock and fixed manufacturing overhead are the main cause of difference in net income. 

These differences can be solved by reconciliation.

Where:

Difference in stock units	= Difference in income ÷ Fixed cost per unit
According to variable costing,               Opening stock in units	= Closing stock in units − Difference in stock units
According to absorption costing,          Opening stock in units	= Closing stock in units + Difference in stock units
According to variable costing, Closing stock– Opening stock	= Difference
According to absorption costing, Opening stock – Closing stock	= Difference

 

Reconciliation Statement

Particulars	Amount
Net income as per variable costing	xxxx
Add:  Closing stock               (units @ FCPU)	xxxx
Less: Opening stock             (units @ FCPU)	(xxx)
Net income as per absorption costing	xxxx

 

Or

Reconciliation Statement

Particulars	Amount
Net income as per absorption costing	xxxx
Add:  Opening stock          (units @ FCPU)	xxxx
Less: Closing stock            (units @ FCPU)	(xxx)
Net income as per variable costing	xxxx

 

 

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Brief Questions

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 1

The extracted data are given to you:

Opening stock      10,000 units

Sales                        60,000 units

Closing stock         20,000 units

Required: Production units

[Answer: 70,000 units]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 2

The extracted data are given to you:

Production       20,000 units

Sales                   25,000 units

Required: Stock

[Answer: Opening stock = 5,000 units]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 3

The extracted data are taken from ABC Manufactures Company:

Sales units                         9,000 units

Production units             12,000 units

Cost data:

Direct materials               60

Direct labor                      40

Variable factory overheads         30

Fixed manufacturing overheads            $180,000

Required: Cost of production under variable costing

[Answer: COP = $15,60,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 4

The extracted data are taken from BC Manufactures Company:

Production units                     12,000 units

Normal output                        9,000 units

Cost data:

Direct materials                      60

Direct labor                              40

Variable factory overheads 30

Fixed manufacturing overheads  $180,000

Required: Cost of production under absorption costing

[Answer: COP = $18,00,000] * FCPU or SFOR = $20

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 5

ABC Manufacturing Company has following extracted data:

Normal output                          35,000 units

Production                                 30,000 units

Opening stock                           5,000 units

Closing stock                              10,000 units

Cost data per unit:

Direct materials                        $260,000

Direct labour                             $350,000

Variable factory overheads   $275,000

Factory manufacturing overheads       $200,000

Required: Cost of goods sold under variable costing

 [Answer: COGS = $735,500]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 6

ABC Manufacturing Company has following extracted data:

Standard fixed overhead rate (SFOR)     $7

Production                                        30,000 units

Sales                                                    35,000 units

Opening stock                                  10,000 units 

Cost data per unit:

Direct materials                                $260,000

Direct labour                                     $350,000

Variable factory overheads          $275,000

Required: Cost of goods sold under absorption costing

[Answer: COGS = $12,77,500] *Closing stock = 5,000 units

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 7

The following extracted information is available:

Net income as per absorption costing $450,000

Opening stock 10,000 units

Closing stock 20,000 units

Normal output was 40,000 units

Fixed manufacturing cost $200,000

Required: Reconciliation statement

[Answer:  Net profit as per variable costing = $400,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 8

The following extracted information is available:

Net income as per variable costing $450,000

Opening stock 10,000 units

Closing stock 20,000 units

Normal output was 40,000 units

Fixed manufacturing cost $200,000

Required: Reconciliation statement

[Answer:  Net profit as per absorption costing = $500,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 9

Following extracted information is given to you:

Cost of goods sold before adjustment $500,000

Fixed manufacturing cost $125,000

Normal output 25,000 units

Output for the period 30,000 units

Required: Cost of goods sold after adjustment

[Answer: $475,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

BQ: 10

Following extracted information is given to you:

Cost of goods sold before adjustment $500,000

Fixed manufacturing cost $125,000

Normal output 25,000 units

Output for the period 22,000 units

Required: Cost of goods sold after adjustment

[Answer: $515,000]

 

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Descriptive Questions

VARIABLE COSTING

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 1

Following are data pertaining to month of December of operation for ABC Textile Company related to school dress:

Opening stock                                     2,000 units	Administrative expenses:
Units produced                                   6,000 units	Fixed                                      $250,000
Normal output                                    5,000 units	Variable                                $250,000
Units sold                                              7,000 units
Selling price per unit                          $300	Selling and distribution expenses:
Fixed manufacturing cost             $200,000	Variable (per unit)             $20
Variable cost per unit:	Fixed (per unit)                   $15
Direct materials                                  50
Direct labor                                          40
Factory overheads                             30

Required: (a) Income statement under variable costing; (b) Reconciliation statement

[Answer :(1)  Net income = $315,000; (2) $275,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 2

AK Manufacturing Company has reported its income statement under absorption costing technique as under:

Particulars		Amount	Amount
Sales revenue                                  (10,000 units x $45)			450,000
Less:	Cost of goods sold:
	Beginning inventory          (2,000 x $27)	54,000
	Variable cost                        (9,000 x $23)	207,000
	Fixed mfg. cost                    (9,000 x $4)	36,000
	Ending inventory                (1,000 x $27)	(27,000)	(270,000)
	Gross margin before adjustment		180,000
Less:	Fixed manufacturing cost under absorbed		4,000
	Gross margin after adjustment		176,000
Less:	Other variable cost		50,000
Net income before tax			$126,000

Required: Income statement under variable costing technique

[Answer: Net income under variable costing = $130,000;

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 3

Following extracted details are given to you by EP Industries:

            Normal capacity                                                        200,000 units per year

            Standard variable manufacturing expenses      $20 per unit

            Fixed manufacturing overhead                             $300,000 per year

            Variable selling expenses                                         $2 per unit

            Fixed selling expenses                                              $100,000

            Unit sale price                                                             $25

The operating results for the year ending December of the last year were as follows

            Sales                                                      150,000 units

            Production                                          180,000 units     

Required: (a) variable costing income statement; (b) Reconciled profit under absorption costing

[Answers: Income under VC = $50,000, under AC = $95,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 4

XYZ Manufacturing Company with normal capacity of 50,000 units supplied you with the following particular:

Production	55,000 units
Sale	60,000 units
Closing stock	5,000 units
Unit variable manufacturing cost	$6
Unit fixed manufacturing overhead	$3
Unit variable selling and administrative cost	$2
Fixed selling & administrative cost	$90,000
Unit selling price	$15

Required: (1) Variable costing income statement; (2) Reconciled profit under absorption costing

 [Answers: (1) $180,000; (2) $165,000]

 

ABSORPTION COSTING

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 5

The extracted cost abstract of EP Manufacturing Company was as follows:

Particulars	Units cost	The operations of the year ended December 2021 were:
Direct materials	$12	Opening stock	10,000 units
Direct labour	$3	Production	90,000 units
Variable manufacturing cost	$2	Sales	80,000 units
Variable selling & distribution expenses	$1	Sales price per unit	$30

Budgeted normal output was 100,000 units with $200,000 fixed manufacturing cost. The fixed selling and distribution expenses were $50,000

Required:      (1) Income statement under absorption costing; (2) Reconciled profit under variable costing

[Answer: Net profit: A.C = $730,000; V.C = $710,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 6

The summarized data of AM Manufacturing Concern for a capacity output of 50,000 units for a year is reported as:

Items	Units Cost	Items	Units Cost
Direct materials	$14	Fixed manufacturing overhead	$75,000 annual
Direct labour	$6	Fixed selling expenses	$50,000 annual
Variable manufacturing overhead	$4	Production	45,000 units
Variable selling expenses	$2	Sales	40,000 units
Sales price per unit	$30

Required: (1) Absorption costing income statement; (2) Reconciled profit under variable costing

[Answers: (1) Net income = $42,500; (2) $35,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 7

ABC Manufacturing Company with normal capacity of 20,000 units furnished you the following information:

Beginning inventory units	3,000	Standard variable cost	$6.50
Units produced during the year	18,000	Fixed factory overhead at normal capacity	$50,000
Units sold during the year	20,000	Fixed selling and distribution cost	$5,000
		Unit selling price	$12

Required:      (1) Income statement under absorption costing; (2) Reconciled profit under variable costing

 [Answers: (1) $50,000; (2) $55,000] *Under absorption = $5,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 8

Following are the references data of month June of operation for XYZ Company:

Opening stock	15,000 units	Variable cost:
Units produced	45,000 units	Direct materials per unit	$4
Units sold	50,000 units	Direct labour per unit	$2
Normal output	50,000 units	Factory overheads per unit	$1
Selling price per unit	$20	Administrative	$50,000
Fixed manufacturing cost	$150,000	Selling and distribution per unit	$1
		Fixed cost:
		Manufacturing	$150,000
		Administrative	$40,000
		Selling and distribution	$30,000

Required: (1) Income statement under absorption costing; (2) Reconciliation statement

            [Answer: (1) Net income = $315,000; (2) $330,000]

 

 

ABSORPTION AND VARIABLE COSTING

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

DQ: 9

Max Company uses direct costing for internal control purchase and absorption costing for external reporting purpose. The following differences are located while comparing the two statements.

Items	Variable Costing	Absorption Costing
Variable manufacturing cost	$60,000	$60,000
Fixed manufacturing cost charged	$25,000	$30,000
Fixed selling and administrative  cost	$40,000	$40,000
Variable selling cost per unit	$2	$2
Selling price per unit	$30	$30

Management also projected the following data for the inventory:

Beginning inventory units            1,000	Sales units                                        5,000
Production units                             6,000	Closing stock units                         2,000

Cost of beginning inventory is the same as the cost of production in the period.

Required: Income statement by using absorption costing and variable costing approach

[Answers: Net profit = $30,000; $25,000]

*Over absorption $5,000]

 

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Analytical Questions

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 1

Fame Readymade Garment has given following data at the end of December 2020; it was anticipated that sales would rise 20% in year 2021. Therefore, production was increased from 20,000 units to meet this expected demand.

Particulars	Amount
Sales units during year	20,000
Selling price per unit	300
Direct materials	45
Direct labors	75
Variable manufacturing overheads	30
Variable administrative expenses	2,50,000
Variable selling and distribution expenses	1,00,000
Fixed manufacturing cost  for the year	9,60,000
Fixed administrative cost	6,00,000
Fixed selling and distribution cost	4,00,000

All taxes are to be ignored. The beginning inventory of the year was nil.

You are required to prepare profit statement for the year ending December 2021

(1) Net income as per variable costing; (2) Net income as per absorption costing

[Answer:  (1) V.C. = $690,000 (2) A.C. = $10,90,000;

* Over absorption = $240,000; Production = 24,000 units]

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 2

XYZ Ltd uses direct costing for internal control purposes and absorption costing for external reporting purposes. The company uses the following unit costs for the one product it manufactures:

Projected cost per unit:
Direct materials	$60
Direct labour	$38
Variable manufacturing	$12
Fixed manufacturing cost	$10 (Based on 10,000 units per month)
Variable selling and administrative cost	$8
Fixed selling and administrative cost	$5.60 (Based on 10,000 units per month)

The projected selling price is $160 per unit. The fixed costs remain fixed within the relevant range of 4,000 to 16,000 units of production.

Management has also projected the following data for the month:

           Opening stock                                       2,000 units

            Production                                            9,000 units

            Sales                                                        7,500 units

Required: projected income statement under direct costing and absorption costing.

                                 [Answer: Variable costing: $1,59,000, Absorption costing: $1,74,000;

* Under absorption cost =100,000 – 90,000 = 10,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 3

ABC Manufacturing Company has following data:

Income Statement under Absorption Costing

[For 14,000 units]

Particulars				Amount
Sales		[16,000 @ $80]                                                        [A]		12,80,000
Manufacturing of goods sold:
	Direct materials	[14,000 units @ $20]		280,000
	Direct labour	[14,000 units @ $10]		140,000
	Variable production cost	[14,000 units @ $15]		210,000
	Fixed manufacturing cost	[14,000 units @ $5]		70,000
		Manufacturing cost @ $50]		700,000
Add:	Opening stock	[3,000 units @ $50]		150,000
Less:	Closing Stock	[1,000 units @ $50]		(50,000)
		COGS before adjustment		800,000
Add:	Under absorption of fixed mfg cost			50,000
		COGS after adjustment (B)		850,000
		Gross profit [A –B]		430,000
Less:	Administrative and selling cost:
	Fixed		80,000
	Variable		50,000	130,000
Net income				300,000

Required: (a) Income statement under variable costing;

(b) Reconciliation of profit between absorption costing and variable costing.

            [Answer:  Net income under V.C. = $3,10,000;

* Fixed Manufacturing cost in V.C = $120,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 4

MS Tech (P) Ltd produces and assembles computer components. The following internal data is available:

Income Statement under Variable Costing

For 20,000 units

Particulars				Amount
Sales revenue		[21,000 units @ $100]		21,00,000
		(A)		21,00,000
Variable cost:
	Direct materials	[20,000 units @ $30]		6,00,000
	Direct labour	[20,000 units @ $15]		3,00,000
	Variable manufacturing cost	[20,000 units @ $10]		2,00,000
		Cost of production  @ $55)		11,00,000
Add:	Beginning inventory	[2,000 units @ $55]		1,10,000
Less:	Ending Inventory	[1,000 units @ $55]		55,000
		COGS (B)		11,55,000
		Gross contribution  (A – B)		9,45,000
Less:	Variable selling administrative cost			1,05,000
		Net contribution		8,40,000
Less:	Fixed manufacturing cost		420,000
	Fixed selling and administrative cost		+ 350,000	7,70,000
Net income				70,000

Normal capacity for the period is 20,000 units.

Required: (1) Net income under external period; (2) Reconciliation statement for the period

[Answer: Net income under A.C. = $49,000; * FCPU = $21]

 

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 5

The following information is given by DT Manufacturing Company:

Income Statement under Variable Costing

For 27,000 units

Particulars				Amount
Sales revenue		[28,000 units @ $30]		840,000
		(A)		840,000
Variable cost:				–
	Direct materials	[27,000 units @ $5]		135,000
	Direct labour	[27,000 units @ $8]		216,000
	Variable manufacturing cost	[27,000 units @ $5]		135,000
		Cost of production  @ $18)		486,000
Add:	Beginning inventory	[3,000 units @ $18]		54,000
Less:	Ending Inventory	[2,000 units @ $18]		36,000
		COGS (B)		504,000
		Gross contribution  (A – B)		336,000
Less:	Variable administrative and selling cost			86,000
		Net contribution		250,000
Less:	Fixed manufacturing cost		100,000
	Fixed selling and administrative cost		+ 50,000	150,000
Net income				100,000

Normal capacity for the period is 25,000 units.

Required: (1) Conversion the income statement into absorption costing statement; (2) Reconciliation statement

[Answer: (1) $96,000; (2) $100,000;

* Over absorption = $8,000]

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 6

The following information is available from Nepal Polymers (P) Ltd:

Particulars	January	February
Selling price per unit	$100	$100
Direct materials and labour per unit	$25	$25
Variable manufacturing cost per unit	$15	$15
Variable selling and administrative cost per unit	$10	$10
Fixed manufacturing cost	$140,000	$140,000
Fixed selling and administrative cost	10% of sales	10% of sales
Units	January	February
Production units	6,000	8,000
Sales units	5,500	7,000

Normal output is 7,000 units per month

Required: (1) Income statement under variable costing; (2) Income statement under absorption costing

[Answer: (1) V.C. = $80,000 and $140,000;

(2) A.C. = $90,000 and $160,000;

* Closing stock in Jan = 500 units; Feb = 1,500 units;

*Under absorption in January = $20,000;

Over absorption in February = $20,000

 

Here, Amount = Rs = $ = £ = € = ₹ = Af = ৳ = Nu = Rf = රු = Br = P = Birr = Currency of your country 

AQ: 7

A manufacturing company provides you the following data for three accounting periods:

Standard capacity is 10,000 units per month. Fixed manufacturing costs budgeted per month $400,000

Production, sales and inventory changes were as follows:

Period	Standard capacity	Produced units	Sold units
January	90%	9,000	9,000
February	110%	11,000	9,000
March	85%	8,500	10,000

Standard capacity utilized by 10,000 units

Other information:

Administrative and selling expenses were:	Variable cost per unit was as following:
Variable $20 per unit	Materials $40
Fixed selling price per period $300,000	Direct labour $40
	Manufacturing $20
	Selling price per unit $200

Determine the income under:

(1) Absorption costing for three months; (2) Marginal costing for three months

(3) Reconciliation of the difference between the net incomes reported under two concepts.

[Answer: (1) $20,000, $100,000, $40,000 (2) $20,000, $20,000, $100,000]

* Absorption: Under in January = $40,000; Over in February = $40,000;

Under in March = $60,000]

 

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