. Use the income statements on the Absorption Statement and Variable Statement p
ID: 2466912 • Letter: #
Question
. Use the income statements on the Absorption Statement and Variable Statement panels to complete the following table for the original production level. Then prepare similar income statements at a production level 10,000 units higher and add that information to the table. Assume that total fixed costs, unit variable costs, unit sales price, and the sales levels are the same at both production levels.
Original
Original
Additional
Additional
Production
Production
10,000
10,000
Level-Absorption
Level-Variable
Units-Absorption
Units-Variable
relevant range.
2. What is the change in net income from producing 10,000 additional units under absorption costing?
3. What is the change in net income from producing 10,000 additional units under variable costing?
Absorption costing does not distinguish between variable and fixed costs. All manufacturing costs are included in the cost of goods sold.
Saxon, Inc.
Absorption Costing Income Statement
For the Year Ended December 31, 2016
1
Sales
$1,280,000.00
2
Cost of goods sold:
3
Beginning inventory
$0.00
4
Cost of goods manufactured
840,000.00
5
Less ending inventory
168,000.00
672,000.00
6
Gross profit
$608,000.00
7
Selling and administrative expenses
273,000.00
8
Income from operations
$335,000.00
Under variable costing, the cost of goods manufactured includes only variable manufacturing costs. This type of income statement includes a calculation of manufacturing margin.
Saxon, Inc.
Variable Costing Income Statement
For the Year Ended December 31, 2016
1
Sales
$1,280,000.00
2
Variable cost of goods sold:
3
Beginning inventory
$0.00
4
Variable cost of goods manufactured
600,000.00
5
Less ending inventory
120,000.00
480,000.00
6
Manufacturing margin
$800,000.00
7
Variable selling and administrative expenses
208,000.00
8
Contribution margin
$592,000.00
9
Fixed costs:
10
Fixed manufacturing costs
$240,000.00
11
Fixed selling and administrative expenses
65,000.00
305,000.00
12
Income from operations
$287,000.00
Original
Original
Additional
Additional
Production
Production
10,000
10,000
Level-Absorption
Level-Variable
Units-Absorption
Units-Variable
Explanation / Answer
In the present statement no of units for which figures given not stated so price and cost per unit can not be found out. So please give the no of units produced . and based on this we can prepare the statement of 10000 units.
Perticulars Amount Percentage Sales 1280000 100 Variable Mfg Cost 480000 37.5 Variable Selling & Admin Cost 208000 16.25 Contribution Marging 592000 46.25 Fixed Cost 305000 Income From Operation 287000Related Questions
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