Randy Company has obtained the following data for the first year of operations:

Question

Randy Company has obtained the following data for the first year of operations:

Sales    $2,868,750

Direct materials and labor       $1,125,000

Variable manufacturing overhead       $431,250

Fixed manufacturing overhead           $656,250

Variable selling expenses        $337,500

Fixed selling expenses            $131,250

Units produced           125,000

Units sold        112,500

Units expected to be produced           125,000

A) Using variable costing, prepare an income statement for the first year of operations. Assume budgeted fixed costs were equal to actual fixed costs.

B) Using absorption costing, prepare an income statement for the first year of operations. Assume budgeted fixed costs were equal to actual fixed costs.

Explanation / Answer

Income Statement Using Variable Cost




Total sales
$        2,868,750 Variable cost of Good Sold:

           Direct Material & Labor $    1,125,000
           Variable manufacturing overhead $        431,250
            Less: Ending Inventory $        155,625
Variable cost of Good Sold
$        1,400,625


Manufacturing Margin
$        1,468,125 Variable selling and administrative expenses
$            337,500


Contribution Margin
$        1,130,625


Fixed cost:

     Fixed manufacturing overhead $        656,250
     Fixed selling and administrative expenses $        131,250
Total fixed cost
$            787,500


Net Income
$            343,125

Related Questions

Navigate

• Browse (All)
• Browse R
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.