Question

Minopera Binocs Inc. Manufactures opera glasses. The company actual and standard costing systems. The opera glasses sell for $ 290 each. For 2019 , the company budgeted fixed manufacturing overhead of $160,000 and fixed selling and administrative costs of $25,000. Budgeted production was 5,000 units. At the end of the year, the following actual results have been reported: Opening inventory was 500 units, with assigned cost of $45,000. Sales were 5,500 units and production was 6,000 units. Total variable manufacturing costs (direct labour and direct materiais) was $ 455,000. Fixed manufacturing overhead was $160,000, , as budgeted. Variable selling and administrative costs were $19.95 per unit. Actual fixed selling and administrative costs were $280,000 Required: Prepare an income statement for Minopera Binocs Inc. for the 2019 fiscal year using absorption standard costing.

Answer 1

Minopera Binocs Inc. Absorption standard costing For the year ended December 31,2019
sales revenue (5500*290)		1595000
less:cost of goods sold
Beginning finished goods inventory	45000
Total manufacturing cost incurred during the year	615000
Less:ending finished goods inventory (102.5*1000)	(102500)
Total cost of goods sold		(557500)
Gross margin		1037500
less:selling and administrative expense		(389725)
Net operating income		647775

working:

Total variable manufacturing cost	455000
Fixed manufacturing overhead	160000
Total manufacturing cost for period	615000
cost per unit produced (615000/6000)=	102.5
Ending inventory (in units)	500beginning+6000 produced-5500sold= 1000

Assuming FIFO method is used that is out of units sold 500 is from beginning inventory and remaining is from current period production.

#selling and administrative cost= [19.95*5500]+280000

             = 109725+280000

             = 389725