Question

You have the following information regarding AJH Company:

Sales 25,000 units per year at $45 per unit

Production 30,000 units in 2004

At the beginning of 2004 there was no inventory.

Direct Materials are $12.00 per unit

Direct labor is $10.00 per unit

Variable manufacturing overhead costs are $8.00 per unit

Fixed manufacturing overhead costs are $150,000 per year

Marketing costs are all variable at $3.00 per unit

Administrative costs are all fixed at $75,000 per year

Required:

(a.) Prepare an income statement under absorption costing for 2004

(b.) Prepare an income statement under variable costing for 2004

(c.) Prepare an income statement under throughput costing for 2004.

Answer 1

	Income statement for 2004 :
1	Absorption costing :
	sales (25,000 units *45 per unit)		1125000
	marginal cost of sales
	direct materials (30,000 *12)	360000
	direct labour (30,000*10)	300000
	variable manufacturing overheads costs (30,000*8)	240000
	fixed manufacturing overhead costs	150000	1050000
	gross profit		75000
	Marketing costs variable (30,000*3)	90000
	administrative costs fixed	75000	165000
	Net Profit/Loss		-90000
2	Marginal costing:
	sales (25,000 units *45 per unit)		1125000
	Less:
	marginal cost of sales
	direct materials (30,000 *12)	360000
	direct labour (30,000*10)	300000
	variable manufacturing overheads costs (30,000*8)	240000
	Marketing costs variable (30,000*3)	90000	990000
	contribution		135000
	Less:
	fixed manufacturing overhead costs	150000
	administrative costs fixed	75000	225000
	Net Profit/Loss		-90000
3	Throughput costing :
	sales (25,000 units *45 per unit)		1125000
	Less:
	Cost of goods sold (30,000 *12)		360000
	Throughput contribution		765000
	Less:
	direct labour (30,000*10)	300000
	variable manufacturing overheads costs (30,000*8)	240000
	fixed manufacturing overhead costs	150000
	Marketing costs variable (30,000*3)	90000
	administrative costs fixed	75000	855000
	Net Profit/Loss		-90000