2 . The variable costing income statement for Vamonos Company for 2014 is as fol
ID: 2371107 • Letter: 2
Question
2. The variable costing income statement for Vamonos Company for 2014 is as follows:
Sales (5,000 units) $100,000
Variable expenses:
Cost of goods sold $30,000
Selling (10% of sales) 10,000
40,000
Contribution margin $ 60,000
Fixed expenses:
Manufacturing overhead $24,000
Administrative 14,400
38,400
Operating income $ 21,600
Selected data for 2014 concerning the operations of the company are as follows:
Beginning inventory -0- units
Units produced 8,000 units
Manufacturing costs:
Direct labor $3.00 per unit
Direct materials 1.60 per unit
Variable overhead 1.40 per unit
Required:
Prepare an absorption costing income statement for 2014.
Explanation / Answer
Cost of goods sold using absorption costing: Cost of goods sold can be determined as follows using absorption costing. Direct material = $865,800 Direct labor = 421,200 Variable factory overhead = 210,600 Fixed factory overfead = 140,400 So cost of goods sold = $1,638,000 Cost of goods sold using variable costing: Under variable costing we will not consider the fixed factory oberhead while calculating the cost of goods sold. Direct material = $865,800 Direct labor = 421,200 Variable factory overhead = 210,600 So cost of goods sold = $1,497,600 Direct material = $865,800 Direct labor = 421,200 Variable factory overhead = 210,600 So cost of goods sold = $1,497,600Related Questions
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