Santana Rey expected sales of her line of computer workstation furniture to equa

Question

Santana Rey expected sales of her line of computer workstation furniture to equal 300 workstations (at a sales price of $3,900) for 2012. The workstations' manufacturing costs include the following.


Direct materials $ 760 per unit
Direct labor $ 320 per unit
Variable overhead $ 60 per unit
Fixed overhead $ 19,200 per year

The selling expenses related to these workstations follow.


Variable selling expenses $ 45 per unit
Fixed selling expenses $ 3,800 per year

Santana is considering how many workstations to produce in 2012. She is confident that she will be able to sell any workstations in her 2012 ending inventory during 2013. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations.

Required:
1.
Compute Business Solutions' absorption costing income assuming. (Omit the "$" sign in your response.)


a. 300 Workstations ________ $
b. 320 Workstations ________ $

2.
Compute Business Solutions

Explanation / Answer

1.
Compute Business Solutions' absorption costing income assuming. (Omit the "$" sign in your response.)

a. 300 Workstations       $791,500
b. 320 Workstations       $870,700


                                                  300 WS            320 WS
Sales revenue                          $1,170,000      $1,248,000
Less : Cost of goods sold
Beginning Inventory                               0                      0
Add: Cost of goods manuf.   
300 @(1,140 + $64)                   $361,200
320 @1,140 + $60)                                          $384,000
Goods available for sales        $361,200       $384,000
Less : Ending inventory                      0                $24,000
Cost of goods sold                  $361,200       $360,000
Gross Margin                          $808,800       $888,000

Less : Selling & Admin. Exp.
Variable Selling & Admin@$45       $13,500           $13,500
Fixed Selling & Amin.                $3,800             $3,800
Total                                           $17,300        $17,300
Net operating Income               $791,500        $870,700
                                     =======================
2.
Compute Business Solutions’ variable costing income assuming. (Omit the "$" sign in your response.)

a. 300 Workstations      $791,500
b. 320 Workstations      $869,500

                                                  300 WS            320 WS
Sales revenue                          $1,170,000      $1,248,000

Less : Variable costs of
          goods sold
Beginning inventory                              0                     0
Add : Variable manuf. costs
300 @1,140                             $342,000
320 @1,140                                                   $364,800

Less : Ending inventory                          0          $22,800
Variable cost of goods sold      $342,000        $342,000

Variable selling & Admin. exp.    $13,500         $13,500
Total variable costs                 $355,500       $355,500
Contribution margin                  $814,500       $892,500

Less : Fixed expenses
Fixed manufacturing overhead    $19,200         $19,200
Fixed selling & admin. exp.          $3,800           $3,800
Total fixed expenses                  $23,000         $23,000
                                            _____________________
Net operating Income             $791,500        $869,500
                                           ===================

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