Exercise 19-7 Income reporting under absorption costing and variable costing LO

Question

Exercise 19-7 Income reporting under absorption costing and variable costing LO P2

[The following information applies to the questions displayed below.]

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business.

Exercise 19-7 Part 1

1. Prepare the current-year income statement for the company using variable costing.

Sales price per unit $ 320 per unit Units produced this year 115,000 units Units sold this year 118,750 units Units in beginning-year inventory 3,750 units Beginning inventory costs Variable (3,750 units × $130) $ 487,500 Fixed (3,750 units × $70) 262,500 Total $ 750,000 Manufacturing costs this year Direct materials $ 50 per unit Direct labor $ 66 per unit Overhead costs this year Variable overhead $ 3,400,000 Fixed overhead $ 7,600,000 Selling and administrative costs this year Variable $ 1,350,000 Fixed 4,400,000

Explanation / Answer

OAK MART COMPANY

Variable Costing Income Statement

Note 1 Inventory at the end of the year (in units)

Particulars Amount Total Revenue (118,750*320) 38,000,000 Variable Cost Variable cost of opening inventory 487,500 Direct Material Cost of goods produced (50*115,000) 5,750,000 Direct Labour Cost of goods produced (66*115,000) 7,590,000 Variable overhead of goods produced 3,400,000 Variable selling and administrative expense 1,350,000 Total Variable Cost 18,577,500 Contribution Margin 19,422,500 Fixed cost of opening inventory 262,500 Fixed overhead of goods produced 7,600,000 Fixed selling and administrative expense 4,400,000 Total Fixed Cost 12,262,500 Net Income 7,160,000

Related Questions

Navigate

• Browse (All)
• Browse E
• Subjects

---

---

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