Question

Rey Company’s single product sells at a price of $223 per unit. Data for its single product for its first year of operations follow.

Direct materials	$	27	per unit
Direct labor	$	35	per unit
Overhead costs
Variable overhead	$	13	per unit
Fixed overhead per year	$	405,000	per year
Selling and administrative expenses
Variable	$	25	per unit
Fixed	$	214,000	per year
Units produced and sold		27,000	units

A. Prepare an income statement for the year using absorption costing Complete this question by entering your answers in the tabs below.

	REY COMPANY Absorption Costing Income Statement ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Net income (loss) ?

B. Prepare an income statement for the year using variable costing. Complete this question by entering your answers in the tabs below.

	REY COMPANY Variable Costing Income Statement ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Net income (loss) ?

Note: Please solve the problem completely, thank you.

Answer 1

		REY COMPANY
	Aborption costing income statement
	Sales					6021000
	less: Cost of good sold
	Direct materials				729000
	Direct labor				945000
	Variable overhead costs				351000
	Fixed overhead costs				405,000
	cost of goods sold					2,430,000
	Gross margin					3,591,000
	Selling and administrative expenses:
	Fixed selling and administrative costs				214,000
	Variable selling and administrative expenses				675000
	total selling ,general and administrative expenses					889,000
	Net income (loss)					2,702,000
	Variable costing income statement
	Sales:					6021000
	less:Variable costs
	Direct materials				729000
	Direct labor				945000
	variable overhead costs				351000
	Variable selling & adm costs				675000
	total variable costs					2700000
	Contribution margin					3321000
	less:Fixed expenses
	Fixed selling and adminisrative costs				214,000
	Fixed overhead costs				405,000
	total fixed costs					619,000
	net income (loss)					2,702,000