Sales- 38,000 units Sales price - $50 per unit Actual variable manufacturing cos

Question

Sales- 38,000 units

Sales price - $50 per unit

Actual variable manufacturing costs- 1,400,000

Actual fixed manufacturing costs- 228,000

Actual variable nonmanufacturing costs-76,000

Actual fixed nonmanufacturing costs- 135,000

Work-in-process inventory, January 1, 2015-   0

Finished goods inventory, January 1, 2015-     0

Direct materials inventory, January 1, 2015-     0

Work-in-process inventory, December 31, 2015-   0

Direct materials inventory, December 31, 2015-    0

Expected production- 40,000 units

Actual production- 40,000 units

Required: A) Using the variable-costing approach, prepare an income statement for the year ended December 31, 2015. Assume actual fixed costs were equal to budgeted fixed costs.

B) Using the absorption-costing approach, prepare an income statement for the year ended December 31, 2015. Assume actual fixed costs were equal to budgeted fixed costs.

Explanation / Answer

Solution:

a. Income Statement under Variable Costing

b. Income Statement under Absorption Costing

Income Statement Under Variable Costing ( $ ) Sales ( 38,000 units )          1,900,000 Variable Costs Actual variable manufacturing costs 1,400,000 Less: Ending Finished Goods 70000 Variable Costs of Goods Produced 1,330,000 Actual variable nonmanufacturing costs 76,000 Total Variable Cost 1,406,000 Contribution Margin             494,000 Fixed Costs Actual fixed manufacturing costs 228,000 Actual fixed nonmanufacturing costs 135,000 Total Fixed Costs 363,000 Net Operating Income             131,000

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