Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During thi

Question

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,050 kayaks and sold 800. at a price of $1,050 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (800 × $1,050) $ 840,000 Cost of goods sold (800 × $450) 360,000 Gross margin 480,000 Selling and administrative expenses 240,000 Net income $ 240,000 . Production cost per kayak totals $450, which consists of $350 in variable production cost and $100 in fixed production cost—the latter amount is based on $105,000 of fixed production costs allocated to the 1,050 kayaks produced. b. The $240,000 in selling and administrative expense consists of $95,000 that is variable and $145,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing

Explanation / Answer

Kenzi Kayaking All Amounts in $ Income Statement under Variable Costing Method Sales 840000 Variable Costs Production Costs 280000 Selling and Administrative 95000 375000 Contribution Margin 465000 Fixed Costs Production Costs 80000 Selling and Administrative 145000 225000 Net Income 240000

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