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? newconnect.mheducation.com A S s Plan Template | ProfitableVenture mework Saved Required information Exercise 19-9 Income statement under absorption costing and variable costing LO P1, P2 The following information applies to the questions displayed below Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 42,000 units and sold 34,000 units at a price of $110 per unit Manufacturing costs $42 s16 Direct materials per unit Direct labor per unit Variable overhead per unit Fixed overhead for the year $378,000 Selling and administrative costs Variable selling and administrative cost per unit Fixed selling and administrative cost per year $100,000 Exercise 19-9 Part 1b 1b. Assume the company uses absorption costing. Prepare its income statement for the year under absorption costing.Explanation / Answer
Calculation of Unit Product cost under absorption costing
Unit Product cost = Direct material + Direct labor + VMOH + Fixed MOH
=42+16+5+(378,000/42000)
=$72
Absorption costing Income Statement
Cool Sky Corp.
Absorption costing Income Statement
Sales [ 34,000 x $110 ]
$ 37,40,000
Cost of goods sold [ 34,000 x $72 ]
24,48,000
Direct material 42*34000= 1428,000
Direct Labor 16*34000= 544000
Variable OH 5*34000= 170,000
Fixed OH 378000*34000/42000= 306000
Gross Margin
12,92,000
Selling and Administrative Expenses
[ $1,00,000 + (34,000 x $9) ]
4,06,000
Net Operating Income
8,86,000
Cool Sky Corp.
Absorption costing Income Statement
Sales [ 34,000 x $110 ]
$ 37,40,000
Cost of goods sold [ 34,000 x $72 ]
24,48,000
Direct material 42*34000= 1428,000
Direct Labor 16*34000= 544000
Variable OH 5*34000= 170,000
Fixed OH 378000*34000/42000= 306000
Gross Margin
12,92,000
Selling and Administrative Expenses
[ $1,00,000 + (34,000 x $9) ]
4,06,000
Net Operating Income
8,86,000
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