Violins Galore produces? student-grade violins for beginning violin students. Th
ID: 2526297 • Letter: V
Question
Violins Galore produces? student-grade violins for beginning violin students. The company produced 2,200 violins in its first month of operations. At? month-end, 550 finished violins remained unsold. There was no inventory in work in process. Violins were sold for $117.50 each. Total costs from the month are as? follows:
Compute the following amounts that would be shown on these income? statements:
1. Gross Profit
2. Contribution Margin
3. Total expenses shown below the gross profit line
4. Total expenses shown below the contribution margin line
Direct materials used
$94,800
Direct labor
$60,000
Variable manufacturing overhead
$30,000
Fixed manufacturing overhead
$41,800
Variable selling and administrative expenses
$7,000
Fixed selling and administrative expenses
$13,700
Direct materials used
$94,800
Direct labor
$60,000
Variable manufacturing overhead
$30,000
Fixed manufacturing overhead
$41,800
Variable selling and administrative expenses
$7,000
Fixed selling and administrative expenses
$13,700
Explanation / Answer
1.GROSS PROFIT= SALES - COST OF GOODS SOLD
SALES = SALES UNIT * SALES PRICE
SALES UNIT = TOTAL PRODUCTION - CLOSING STOCK
SALES UNIT= 2200-550= 1650 UNITS
SALES= 1650 UNITS * $117.50= $193875
COST OF GOODS SOLD= DIRECT MATERIALS + DIRECT LABOUR + VARIABLE MANUFACTURIING OVERHEAD + FIXED MANUFACTURING OVERHEAD - VALUE OF CLOSING STOCK
VALUE OF CLOSING STOCK = (TOTAL MANUFACTURING COST * UNSOLD UNITS )/TOTAL UNITS PRODUCED
TOTAL MANUFACTURING COST = DIRECT MATERIALS + DIRECT LABOUR + VARIABLE MANUFACTURIING OVERHEAD + FIXED MANUFACTURING OVERHEAD
$94800+$60000+$30000+41800=$226600
CLOSING STOCK = ($226600*550)/2200=$56650
COST OF GOODS SOLD = $226600-$56650=$169950
GROSS PROFIT = $193875-$169950= $23925
2.) CONTRIBUTION MARGIN
SALES - TOTAL VARIABLE COST OF PRODUCT SOLD
SALES= $193875
TOTAL VARIABLE COST OF PRODUCT SOLD = TOTAL VARIABLE COST OF GOODS PRODUCED - CLOSING STOCK
CLOSING STOCK = (TOTAL VARIABLE MANUFACTURING COST*UNSOLD UNITS)TOTAL UNITS PRODUCED
TOTAL VARIABLE MANUFACTURING COST= DIRECT MATERIALS + DIRECT LABOUR + VARIABLE MANUFACTURIING OVERHEAD
$94800+$60000+$30000=$184800
CLOSING STOCK = ($184800*550)/2200=$46200
TOTAL VARIABLE COST = TOTAL VARIABLE MANUFACTURING COST +TOTAL VARIABLE SELLING AND ADMINISTRATION EXPENSES- CLOSING STOCK
$184800+$7000-$46200=$145600
CONTRIBUTION= $193875-$145600= $48275
3.) TOTAL EXPENSES SHOWN BELOW THE GROSS PROFIT LINE
TOTAL VARIABLE SELLING AND ADMINISTRATION EXPENSES+TOTAL FIXED SELLING AND ADMINISTRATION EXPENSES
$7000+$13700=$20700
4.)TOTAL EXPENSES SHOWN BELOW THE CONTRIBUTION LINE
TOTAL FIXED MANUFACTURING EXPENSES + TOTAL FIXED SELLING AND ADMINISTRATION EXPENSES
$41800+$13700= $55500
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