Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During thi
ID: 2553341 • Letter: K
Question
Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,075 kayaks and sold 825. at a price of $1,075 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (825x $1,075) Cost of goods sold (825x $475) Gross margin Selling and administrative expenses Net income $886,875 391,875 495,000 210,000 $285,000 Additional Information a. Product cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production cost-the latter amount is based on $107,500 of fixed production costs allocated to the 1,075 kayaks produced. b. The $210,000 in selling and administrative expense consists of $75,000 that is variable and $135,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing.Explanation / Answer
Kenzi Kayaking
Variable Costing Income Statement
Sales (825 x 1075) $ 8,86,875
Variable expense
Variable production costs (825x375) $ 3,09,375
Variable selling and administrative cost $ 75,000
Total Variable expenses $ 3,84,375
Contribution margin $ 5,02,500
Fixed expenses
Fixed overhead (875x100) $ 87,500
Fixed selling and administrative cost $ 1,35,000
Total Fixed expenses $ 2,22,500
Net income $ 2,80,000
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