Bionic Cotton Inc. manufactures and sells high-quality sporting goods equipment

Question

Bionic Cotton Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable Cool Cat logo. The company began operations on January 1, 2016, and operated at 100% of capacity (88,000 units) during the first month, creating an ending inventory of 6,000 units During February, the company produced 80,200 garments during the month but sold 86,200 units at $92 per unit. The February manufacturing costs and selling and administrative expenses were as follows: Number of Units Unit Cost Total Cost Manufacturing costs in February beginning inventory Variable Fixed Total February manufacturing costs: Variable Fixed Total Selling and administrative expenses Variable Fixed Total 6,000 $52 312,000 6,000 8 48,000 $60 $360,000 $52 $ 4,170,400 10 $62 $4,972,400 80,200 80,200 802,000 1,310,000 338,000 $1,648,000

Explanation / Answer

A) ABSORPTION COSTING INCOME STATEMENT Sales 7930400 Cost of goods sold: Cost of goods manufactured 4972400 Beginning inventory 360000 Cost of goods sold 5332400 Gross profit 2598000 Selling and administration expenses 1648000 Income from operattions 950000 B) VARIABLE COSTING INCOME STATEMENT Sales 7930400 Variable cost of goods sold (312000+4170400) 4482400 Manufacturing margin 3448000 Variable selling and administrative expenses 1310000 Contribution margin 2138000 Fixed costs: Fixed manufacturing costs 802000 Fixed selling and administrative expenses 338000 1140000 Income from operations 998000

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