Nelson Corporation, which has only one product, has provided the following data

Question

Nelson Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Picture The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

: a. Prepare a contribution format income statement for the month using variable costing.

b. Prepare an income statement for the month using absorption costing.

Explanation / Answer

a. Income statement for the month using variable costing:

b. Income Statement for the month using absorption costing:

Variable cost per unit = Direct materials + Direct labor + Variable manufacturing overhead + Variable selling and administrative overhead = 25 + 10 + 7+ 10 = $ 52

Cost of manufacture per unit = Direct material + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead = 25 + 10 + 7 + 38,000 / 1,900 = $ 62

$ Sales revenue ( 2,100 x $ 84) 176,400 Less total variable cost ( 2,100 x $ 52) 109,200 Contribution margin 67,200 Less Fixed costs: Manufacturing 38,000 Selling and administrative 21,000 Income from operations 8,200

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