On January 1 of the current year, C. F. Hartley Co.commenced operations. It oper
ID: 2512411 • Letter: O
Question
On January 1 of the current year, C. F. Hartley Co.commenced operations. It operated its plant at 70% ofcapacity during January The following data summarized the results for January: Production Sales (S18 per unit) Inventory, January 31 Units 50,000 42.000 8,000 Total Cost or Expense Manufacturing costs: Variable Fixed S575,000 75,000 S650,000 Total Variable Fixed $ 33,600 10.500 $ 44,100 Total (a) Prepare an income statement in accordance with absorption costing (b) Prepare an income statement in accordance with variable costing.Explanation / Answer
Answer
Total manufacturing cost
$650000
Total units produced
50000
Manufacturing cost per unit
$13
Fixed manufacturing cost forms part of the cost of goods sold
Sales
[42000 units x $18]
$756000
Less: Cost of Goods Sold
[42000 units x $13]
$546000
Gross Profits
[756000-546000]
$210000
Less: Selling & administrative expenses
$44100
Net Income
$165,900
Sales
[42000 units x $18]
756000
Less variable costs:
Manufacturing cost
575000
Selling & Admin cost
33600
608600
Contribution Margin
[756000-608600]
$147400
Less Fixed Cost:
Manufacturing cost
75000
Selling & Admin cost
10500
85500
Net Income
[147400-85500]
$61,900
Total manufacturing cost
$650000
Total units produced
50000
Manufacturing cost per unit
$13
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