Serial Problem Business Solutions P2, P3 Santana Rey expects sales of Business S

Question

Serial Problem Business Solutions P2, P3

Santana Rey expects sales of Business Solutions’s line of computer workstation furniture to equal 300 workstations (at a sales price of $4,000 each) for 2018. The workstations’ manufacturing costs include the following.

The selling expenses related to these workstations follow.

Santana is considering how many workstations to produce in 2018. She is confident that she will be able to sell any workstations in her 2018 ending inventory during 2019. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations.

Required:
1. Complete the following income statements using absorption costing.

Direct materials $ 710 per unit Direct labor $ 320 per unit Variable overhead $ 50 per unit Fixed overhead $ 24,000 per year

Explanation / Answer

Production Volume Cost of goods sold: 300 workstations 320 workstations Direct materials 710 710 Direct labor 320 320 Variable overhead 50 50 Fixed overhead ($24000/300); ($24000/320) 80 75 Cost of goods sold per unit 1160 1155 Number of workstations sold 300 300 Total cost of goods sold 348000 346500 BUSINESS SOLUTIONS Absorption Costing Income Statements Production Volume Sales volume - 300 Workstations 300 workstations 320 workstations Sales 1200000 1200000 Cost of goods sold 348000 346500 Gross profit 852000 853500 Selling and administrative expense [(300 x $45) + $3500] 17000 17000 Net income 835000 836500 Under absorption costing, can the difference between production volume and sales volume affect the reported net income (loss)? Yes

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

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