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Prepare income statements using variable costing and absorption costing. Alexandra Manufacturing manufactures a single product.​ Cost,...

Prepare income statements using variable costing and absorption costing.

Alexandra Manufacturing manufactures a single product.​ Cost, sales, and production information for the company and its single product is as​ follows:

Sales price per unit $49

Variable manufacturing costs per unit manufactured (DM,DL and variable MOH) $30

Variable operating expenses per unit sold $3

Fixed manufacturing overhead (MOH) in total for the year $114,000

Fixed operating expenses in total for the year $46,000

Units manufactured during the year 19,000 units

Units sold during the year 16,500 units

Requirement 1. Prepare an income statement for the upcoming year using variable costing.

Requirement 2. Prepare an income statement for the upcoming year using absorption costing.

Solutions

Expert Solution

Answer:1)-

Alexandra Manufacturing
Income statement (Using variable costing approach)
Particulars Amount
$
Sales (a) 16500 units*$49 per unit 808500
Less:- Variable cost of goods sold (b)
Opening inventory NIL
Add:- Variable cost of goods manufactured 19000 units*$30 per unit 570000
Variable cost of goods available for sale 570000
Less:- Closing inventory 2500 units*$30 per unit 75000 495000
Gross contribution margin C= a-b 313500
Less:-Variable selling & administrative exp. 16500 units*$3 per unit 49500
Contribution margin 264000
Less:- Fixed costs
Manufacturing overhead 114000
Selling & administrative exp. 46000
Net Income 104000

2)-

Alexandra Manufacturing
Income statement (Using absorption costing approach)
Particulars Amount
$
Sales (a) 16500 units*$49 per unit 808500
Less:- Variable cost of goods sold (b)
Opening inventory
Add:- Variable cost of goods manufactured 19000 units*$30 per unit 570000
Fixed manufacturing overhead 114000
Variable cost of goods available for sale 684000
Less:- Closing inventory 2500 units*$36 per unit 90000 594000
Gross contribution margin C= a-b 214500
Less:-Variable selling & administrative exp. 16500 units*$3 per unit 49500
Contribution margin 165000
Less:- Fixed costs
Selling & administrative exp. 46000
Net Income 119000

Explanation:-

Unit product cost under Absorption costing:-Direct materials + Direct Labor+ Variable manufacturing overhead + fixed manufacturing overhead

=$30+ $6= $36 per unit

Explanation:- Unit fixed manufacturing overhead= fixed manufacturing overhead/No. of units produced

=$114000/19000 units =$ 6 per unit

Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$30 per unit

ekkarill92 answered 10 months ago
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