Randy.com is a direct marketer of popular music. Following is information about
ID: 2356644 • Letter: R
Question
Randy.com is a direct marketer of popular music. Following is information about its revenue and cost structure: Selling Price $15.00 per CD Variable Costs: Production (manufacturing costs) $3.00 per CD Selling and Administration (non-manufacturing costs) $1.00 per CD Fixed Costs: Production (manufacturing costs) $1,000,000 per year Selling and Administration (non-mfg costs) $2,000,000 per year Reference: Ref 5-5 Assume 400,000 CDs are produced and 350,000 are sold in 2008. What is income under Full Costing?Explanation / Answer
sales
5250000
(15*350,000)
cost of goods sold:
variable manufacturing
1050000
(3*350,000)
fixed manufacturing
875000
(1,000,000*(350,000/400,000)
cost of goods sold
1925000
gross profit
3325000
selling and admin:
variable selling & admin
350000
(1*350,000)
fixed selling and admin
2,000,000
total selling and admin
2,350,000
net operating income
975,000
sales
5250000
(15*350,000)
cost of goods sold:
variable manufacturing
1050000
(3*350,000)
fixed manufacturing
875000
(1,000,000*(350,000/400,000)
cost of goods sold
1925000
gross profit
3325000
selling and admin:
variable selling & admin
350000
(1*350,000)
fixed selling and admin
2,000,000
total selling and admin
2,350,000
net operating income
975,000
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