Oates Company, which has only one product, has provided the following data conce
ID: 2382222 • Letter: O
Question
Oates Company, which has only one product, has provided the following data concerning its most recent month of operations, December:
Selling price...............................................
$120
Units in beginning inventory.....................
0
Units produced..........................................
7,600
Units sold..................................................
7,400
Units in ending inventory..........................
200
Variable costs per unit:
Direct materials......................................
$15
Direct labor.............................................
$48
Variable manufacturing overhead..........
$7
Variable selling and administrative........
$10
Fixed costs:
Fixed manufacturing overhead..............
$228,000
Fixed selling and administrative............
$66,600
Required:
a. Prepare an income statement for the month using the contribution format and the variable costing method.
b. Prepare an income statement for the month using the absorption costing method.
Selling price...............................................
$120
Units in beginning inventory.....................
0
Units produced..........................................
7,600
Units sold..................................................
7,400
Units in ending inventory..........................
200
Variable costs per unit:
Direct materials......................................
$15
Direct labor.............................................
$48
Variable manufacturing overhead..........
$7
Variable selling and administrative........
$10
Fixed costs:
Fixed manufacturing overhead..............
$228,000
Fixed selling and administrative............
$66,600
Explanation / Answer
a)
Sales(120*7400)=$888000
Less:variable cost
Direct materials.(15*7600)=114000
Direct labor.(48*7600)=364800
Variable manufacturing overhead(7*7600)=53200
Variable selling and administrative(10*7600)=76000
COntribution=$280000
Add:cost of closing stock(200*80)=16000
Less fixed costs
Fixed manufacturing overhead.=$228000
Fixed selling and administrative=$66600
Add:cost of closing stock(200*80)=16000
Net income=1400
b)Sales(120*7400)=$888000
Less:variable cost
Direct materials.(15*7600)=114000
Direct labor.(48*7600)=364800
Variable manufacturing overhead(7*7600)=53200
Variable selling and administrative(10*7600)=76000
COntribution=$280000
Add:cost of closing stock(200*80)=16000
Less fixed costs
Fixed manufacturing overhead.=$228000
Fixed selling and administrative=$66600
Add:cost of closing stock(200*80)=16000
Net income=1400
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