AT&T; PROBLEM V 9:41 PM 72% Gia\'s Foods produces frozen meals that it sells for

Question

AT&T; PROBLEM V 9:41 PM 72% Gia's Foods produces frozen meals that it sells for $8 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Gia's Foods' first month in business anua Units produced and sold Sales 950 meals Production 1,150 meals Variable manufacturing cost per meals 4 Sales commission cost per meal Total fixed manufacturing overhead 690 Total fixed selling and administrative costs 700 Requirements Prepare income statements for January 2016 using a. variable costing

Explanation / Answer

(a.)

GIA FOODS

INCOME STATEMENT (VARIABLE COSTING)

FOR THE YEAR ENDED JANUARY ,2016

TOTAL NET OPERATING INCOME FOR THE YEAR ENDED JANUARY 2016 is $660

NOTE : AS THE QUESTION SPECIFIES THAT THE FIXED MANUFACTURING OVERHEAD ALLOCATION RATE IS CALCULATED ON THE BASIS OF PLANNED NUMBER OF MEALS TO BE PRODUCED THAT MONTH .HENCE TOTAL FIXED MANUFACTURING OVERHEAD (IT IS ALREADY GIVEN) WILL BE

= $690*1150 MEALS/1150 MEALS

=$690

PARTICULARS CALCULATION AMOUNT (IN $) SALES 950 MEALS*$8 7600 LESS: VARIABLE PRODUCTION EXPENSES 1150MEALS*$4 4600 LESS: VARIABLE SELLING AND ADMINISTRATIVE 950MEALS*$1 950 CONTRIBUTION MARGIN 2050 LESS: FIXED PRODUCTION EXPENSES GIVEN 690 LESS: FIXED SELLING AND ADMINISTRATIVE GIVEN 700 NET OPERATING INCOME 660

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