Question

Map Company, which has only one product, has provided the following data concerning its most recent month of operations:

           

	Selling price...............................................	$140
	Units in beginning inventory.....................	0
	Units produced..........................................	8,400
	Units sold..................................................	8,200
	Units in ending inventory..........................	200
	Variable costs per unit:
	Direct materials.......................................	$42
	Direct labor.............................................	$32
	Variable manufacturing overhead...........	$1
	Variable selling and administrative.........	$8
	Fixed costs:
	Fixed manufacturing overhead................	$280,800
	Fixed selling and administrative..............	$98,000

            Required:

           

Prepare an income statement for the month using the contribution format and the variable costing method.

Prepare an income statement for the month using the absorption costing method.

Answer 1

Under variable costing :
Direct materials	42
Direct labor	32
Variable manufacturing overhead	1
Cost of goods manfactured	75
under absorption costing
	$
Direct materials	42
Direct labor	32
Variable manufacturing overheads	1
Fixed manufacturing overheads (280800/8400)	33.43
Cost of goods manfactured	108.43
Contribution format income statement
Under variable costing :
		$
Sales (8200*140)		1148000
Less: Variable cost of goods sold:
Beginning invenotry	0
Variable cost of goods manufactured (8400*75)	630000
Variable cost of goods available for sale	630000
Closing inventory (200*75)	-15000	615000
Gross contribution margin		533000
Variable selling and administrative expenses (8200*8)		65600
		467400
Less: Fixed costs
Manufacturing overheads	280800
Selling and administrative overheads	98000	378800
Net operating income		88600
Income statement absorption costing
		$
Sales		1148000
Less cost of goods sold:
Beginning inventory	-
Cost of goods manufactured (8400*108.43	910812
Cost of goods available for sale	910812
Closing inventory (200*108.43	-21686	889126
Gross profit		258874
Less: selling and administrative overheads
Variable (8200*8	65600
Fixed	98000	163600
Net operating income		95274