During the year, BrightLight Inc. Produced 60,000 units of their specialty light
ID: 2443527 • Letter: D
Question
During the year, BrightLight Inc. Produced 60,000 units of their specialty lights. The specialty lights sell for $99 each. Beginning inventory of the specialty lights was zero. At the end of the year a physical inventory count revealed that only 8,400 remained. The cost accountant at BrightLight Inc. determined the following variable costs for the production of the specialty lights (costs are PER UNIT):Direct Materials
Direct Labor
Variable Overhead
Variable Selling and Admin.
The cost accountant also informed you that the company incurred total fixed overhead in the amount of $747,000 and total fixed selling and administrative costs of $219,000 during the year.
Required:
a.) Prepare an Income Statement using absorption costing.
b.) Calculate the cost of ending inventory under absorption costing.
c.) Prepare an Income Statement using variable costing
d.) Calculate the cost of ending inventory under variable costing.
Explanation / Answer
a.) Absorbtion Costing
Sales 5,108,400
-Cost of goods sold - 2,732,220
----------------
= Gross Margin 2,376,180
- Selling and Administrative - 683,400
----------------
Operating Income 1,692,780
b.) Ending Inventory = (52.95 * 8400) = 444,780
c.) Variable Costing
Sales 5,108,400
- Variable Cost -(2,554,200)
_____________
= Contribution Margin 2,554,200
- Fixed costs - (966,000)
_____________
=Operating Income 1,588,200
d.) Ending inventory = (40.5 * 8,400) = 340,200
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