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Question 8 Following is the revenue and cost data for Barian Ltd. in the manufacturing of...

Question 8

Following is the revenue and cost data for Barian Ltd. in the manufacturing of luxury shower curtains for the year ended December 31, 2020:
Variable manufacturing costs $35 per curtain
Fixed manufacturing overhead $86,500
Variable selling and administrative expenses $6 per curtain
Fixed selling and administrative expenses $184,600
Selling price $85 per curtain
Units produced and sold 8,650
Prepare an income statement using absorption costing.
Barian Ltd.
Income Statement

December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020


Absorption Costing

Contribution MarginNet Income / (Loss)Variable CostsSalesGross ProfitCost of Goods SoldFixed Costs

$

Variable CostsGross ProfitCost of Goods SoldContribution MarginNet Income / (Loss)SalesFixed Costs

Contribution MarginFixed CostsGross ProfitNet Income / (Loss)Cost of Goods SoldSalesVariable Costs

    Fixed Selling and Administrative Expenses    Fixed Manufacturing Overhead    Variable Selling and Administrative Expenses    Variable Costs of Goods Available for Sale    Variable Costs of Goods Manufactured    Variable Cost of Goods Sold    

    Variable Costs of Goods Manufactured    Variable Costs of Goods Available for Sale    Variable Selling and Administrative Expenses    Fixed Manufacturing Overhead    Fixed Selling and Administrative Expenses    Variable Cost of Goods Sold    

Gross ProfitContribution MarginFixed CostsVariable CostsSalesNet Income / (Loss)Cost of Goods Sold

$
Prepare an income statement using variable costing.
Barian Ltd.
Income Statement

December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020


Variable Costing

Contribution MarginVariable CostsFixed CostsSalesGross MarginCost of Goods SoldNet Income / (Loss)

$

    Variable Selling and Administrative Expenses    Variable Cost of Goods Sold    Fixed Selling and Administrative Expenses    Variable Costs of Goods Available for Sale    Fixed Manufacturing Overhead    

    Variable Selling and Administrative Expenses    Fixed Manufacturing Overhead    Variable Cost of Goods Sold    Variable Costs of Goods Available for Sale    Fixed Selling and Administrative Expenses    

SalesGross MarginCost of Goods SoldContribution MarginNet Income / (Loss)Fixed CostsVariable Costs

Variable Selling and Administrative ExpensesVariable Costs of Goods Available for SaleVariable Cost of Goods SoldFixed Selling and Administrative ExpensesFixed Manufacturing Overhead

Variable Costs of Goods Available for SaleFixed Manufacturing OverheadVariable Cost of Goods SoldVariable Selling and Administrative ExpensesFixed Selling and Administrative Expenses

SalesVariable CostsCost of Goods SoldGross MarginContribution MarginFixed CostsNet Income / (Loss)

$

Solutions

Expert Solution

Budgeted manufacturing cost per unit under absorption costing
Fixed Manufacturing cost=(A) 86500
Production units=(B) 8650
Fixed Manufacturing cost per unit=(C )=(A)/(B) 10
Variable manufacturing cost per unit=(D) 35
Total Manufacturing cost per unit=(C )+(D) 45
Barian Ltd
Income statement under Absorption Costing
December 31st,2020
Revenue(8650*$85)=(A) $                 7,35,250.00
Cost of goods sold
Variable manufacturing cost(8650*$35) $                 3,02,750.00
fixed manaufacturing cost $                     86,500.00
Cost of goods available for sales $                 3,89,250.00
Cost of goods sold=(B) $                 3,89,250.00
Gross Margin(Revenue-Cost of goods sold)=(C ) $                 3,46,000.00
Less: Operating Cost=(D )
Variable selling & Administrative cost(8650*$6) $                     51,900.00
Fixed selling & Administrative cost $                 1,84,600.00
Operating Income=(C )-(D ) $                 1,09,500.00
Barian Ltd
Income Statement under Variable Costing
December 31st,2020
Revenue(8650*$85)=(A) $                 7,35,250.00
Variable cost:
Add: Variable manufacturing cost(8650*$35)=(ii) $                 3,02,750.00
Variable selling & Administrative cost(8650*$6) $                     51,900.00
Total Variable cost=(B) $                 3,54,650.00
Contribution Margin=(C )=(A)-(B) $                 3,80,600.00
Less: Fixed Cost=(D )
Fixed Manufacturing Overhead $                     86,500.00
Fixed selling & Administrative cost $                 1,84,600.00
Net Operating Income=(C )-(D) $                 1,09,500.00
Note: In case Units Produced=Units sold there is no difference between Absorption costing and Variable
costing Net Income.

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