Question

I sold everything I produced. Sales were $10,000. Variable product cost was $4000. Fixed overhead was $2000. Administrative expenses were $3000. do an absorption costing income statement and a variable costing statement, then answer the following questions.

A. $6,000

B. $1,000

C. $4,000

Cost of goods sold is
Gross profit is
variable product cost is
Contribution margin is
both statements have a net income of

Answer 1

Variable costing approach
Sales	10,000
Less : Variable expenses
Variable product cost	4,000
Variable manufacturing margin	6,000
Less : Selling and administrative expenses
Contribution margin	3,000
Less :Fixed overhead	2,000
Net operating income	1,000
Absorption costing approach
Sales	10,000
Less : Cost of goods sold
Variable product cost	4,000
Fixed overhead	2,000
Gross profit	4,000
Less : Selling and administrative expenses
Administrative expenses	3,000
Net operating income	1,000
Cost of goods sold is (4,000+2,000) = 6,000
Gross profit is 4,000
variable product cost is 4,000
Contribution margin is 3,000
both statements have a net income of as shown above