Question

In: Accounting

Exercise 19-5 Absorption costing and variable costing income statements LO P2 Rey Company’s single product sells...

Exercise 19-5 Absorption costing and variable costing income statements LO P2

Rey Company’s single product sells at a price of $216 per unit. Data for its single product for its first year of operations follow.

Direct materials $ 20 per unit
Direct labor $ 28 per unit
Overhead costs
Variable overhead $ 6 per unit
Fixed overhead per year $ 160,000 per year
Selling and administrative expenses
Variable $ 18 per unit
Fixed $ 200,000 per year
Units produced and sold 20,000 units


1. Prepare an income statement for the year using absorption costing
2. Prepare an income statement for the year using variable costing.

Solutions

Expert Solution

1.

Rey Company’s
Absorption Costing Income Statement
Sales (20,000 x 216) $4,320,000
Cost of goods sold:
Direct materials ( 20,000 x 28) 560,000
Direct labor ( 20,000 x 20) 400,000
Variable overhead ( 20,000 x 6) 120,000
Fixed overhead 160,000
Cost of goods sold -1,240,000
Gross profit $3,080,000
Operating expenses:
Variable selling and administrative expenses ( 20,000 x 18) 360,000
Fixed selling and administrative expenses 200,000
Total operating expense -560,000
Net Income $2,520,000

2.

Rey Company’s
Variable costing Income Statement
Sales (20,000 x 216) $4,320,000
Less: Variable expense:
Direct materials ( 20,000 x 28) 560,000
Direct labor ( 20,000 x 20) 400,000
Variable overhead ( 20,000 x 6) 120,000
Variable selling and administrative expenses ( 20,000 x 18) 360,000
Total Variable expenses -1,440,000
Contribution margin $2,880,000
Less: Fixed expense:
Fixed overhead 160,000
Fixed selling and administrative expenses 200,000
Total fixed expenses -360,000
Net Income $2,520,000

Related Solutions

Exercise 19-5 Absorption costing and variable costing income statements LO P2 Rey Company’s single product sells...
Exercise 19-5 Absorption costing and variable costing income statements LO P2 Rey Company’s single product sells at a price of $236 per unit. Data for its single product for its first year of operations follow. Direct materials $ 40 per unit Direct labor $ 48 per unit Overhead costs Variable overhead $ 4 per unit Fixed overhead per year $ 141,000 per year Selling and administrative expenses Variable $ 38 per unit Fixed $ 240,000 per year Units produced and...
Required information Exercise 19-7 Income reporting under absorption costing and variable costing LO P2 [The following...
Required information Exercise 19-7 Income reporting under absorption costing and variable costing LO P2 [The following information applies to the questions displayed below.] Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. Sales price per unit $ 300 per unit Units produced this year 120,000 units Units sold this year 123,750 units Units in beginning-year inventory 3,750 units Beginning inventory costs Variable (3,750 units × $135) $ 506,250 Fixed (3,750 units...
Required information Exercise 19-7 Income reporting under absorption costing and variable costing LO P2 [The following...
Required information Exercise 19-7 Income reporting under absorption costing and variable costing LO P2 [The following information applies to the questions displayed below.] Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. Sales price per unit $ 300 per unit Units produced this year 120,000 units Units sold this year 123,750 units Units in beginning-year inventory 3,750 units Beginning inventory costs Variable (3,750 units × $135) $ 506,250 Fixed (3,750 units...
Exercise 19-3 Income reporting under absorption costing and variable costing LO P2 Sims Company, a manufacturer...
Exercise 19-3 Income reporting under absorption costing and variable costing LO P2 Sims Company, a manufacturer of tablet computers, began operations on January 1, 2017. Its cost and sales information for this year follows. Manufacturing costs Direct materials $ 35 per unit Direct labor $ 55 per unit Overhead costs for the year Variable overhead $ 3,000,000 Fixed overhead $ 7,000,000 Selling and administrative costs for the year Variable $ 750,000 Fixed $ 4,250,000 Production and sales for the year...
Exercise 19-3 Income reporting under absorption costing and variable costing LO P2 Sims Company, a manufacturer...
Exercise 19-3 Income reporting under absorption costing and variable costing LO P2 Sims Company, a manufacturer of tablet computers, began operations on January 1, 2017. Its cost and sales information for this year follows. Manufacturing costs Direct materials $ 35 per unit Direct labor $ 55 per unit Overhead costs for the year Variable overhead $ 3,000,000 Fixed overhead $ 7,000,000 Selling and administrative costs for the year Variable $ 750,000 Fixed $ 4,250,000 Production and sales for the year...
Problem 19-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 Trez...
Problem 19-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Sales (80,000 units × $45 per unit) $ 3,600,000 Cost of goods sold Beginning inventory $ 0 Cost of goods manufactured (100,000 units × $25 per unit) 2,500,000 Cost of good available for sale 2,500,000 Ending inventory...
Problem 19-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 Trez...
Problem 19-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Sales (80,000 units × $40 per unit) $ 3,200,000 Cost of goods sold Beginning inventory $ 0 Cost of goods manufactured (100,000 units × $20 per unit) 2,000,000 Cost of good available for sale 2,000,000 Ending inventory...
Required information Exercise 6-9 Income statement under absorption costing and variable costing LO P1, P2 [The...
Required information Exercise 6-9 Income statement under absorption costing and variable costing LO P1, P2 [The following information applies to the questions displayed below.] Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 44,000 units and sold 36,000 units at a price of $120 per unit.    Manufacturing costs Direct materials per unit $ 48 Direct labor per unit $ 18 Variable overhead per unit $...
Problem 06-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 Trez...
Problem 06-2A Variable costing income statement and conversion to absorption costing income LO P2, P3 Trez Company began operations this year. During this first year, the company produced 100,000 units and sold 80,000 units. The absorption costing income statement for this year follows. Sales (80,000 units × $45 per unit) $ 3,600,000 Cost of goods sold Beginning inventory $ 0 Cost of goods manufactured (100,000 units × $25 per unit) 2,500,000 Cost of goods available for sale 2,500,000 Ending inventory...
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...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT