In: Accounting
During its first month of operations, Hanson Baking Company produced 7,000 cakes of which 6,400 were sold. The following information was taken from the accounting records for the month of July, 2011:
July 20xx
Sales |
$128,000 |
|
Manufacturing Costs |
||
Direct Materials |
$53,900 |
|
Direct Labor |
25,900 |
|
Variable Manufacturing Overhead |
14,000 |
|
Fixed Manufacturing Overhead |
18,200 |
|
Selling and Administrative Expenses |
||
Variable |
$14,080 |
|
Fixed |
6,400 |
During August, Hanson Baking Company produced 5,800 cakes of which 6,400 were sold. The following information was taken from the accounting records for the month August, 2011:
August 20xx
Sales |
$128,000 |
|
Manufacturing Costs |
||
Direct Materials |
$44,660 |
|
Direct Labor |
21,460 |
|
Variable Manufacturing Overhead |
11,600 |
|
Fixed Manufacturing Overhead |
18,200 |
|
Selling and Administrative Expenses |
||
Variable |
$14,080 |
|
Fixed |
6,400 |
Required: - Complete the following using Excel
Prepare an income statement using both Absorption and Variable Costing for the months of May and June.
Compare the net income for May and June under Absorption Costing. Are the amounts different or the same? Explain
Compare the net income for May and June under Variable Costing. Are the amounts different or the same? Explain
Q1 | ||
Income statement-variable costing | ||
May | June | |
Sales | $ 128,000 | $ 128,000 |
Less: Variable Manufacturing Costs | ||
Direct Materials | $ 53,900 | $ 44,660 |
Direct Labor | $ 25,900 | $ 21,460 |
Variable Manufacturing Overhead | $ 14,000 | $ 11,600 |
Selling and Administrative Expenses-Variable | $ 14,080 | $ 14,080 |
Contribution | $ 20,120 | $ 36,200 |
Less: Fixed cost | ||
Fixed Manufacturing Overhead | $ 18,200 | $ 18,200 |
Selling and Administrative Expenses-Fixed | $ 6,400 | $ 6,400 |
Net income | $ (4,480) | $ 11,600 |
Income statement-Absorption costing | ||
May | June | |
Sales | $ 128,000 | $ 128,000 |
Less: Manufacturing Costs | ||
Direct Materials | $ 53,900 | $ 44,660 |
Direct Labor | $ 25,900 | $ 21,460 |
Variable Manufacturing Overhead | $ 14,000 | $ 11,600 |
Fixed Manufacturing Overhead | $ 16,640 | $ 19,760 |
Cost of goods sold | $ 17,560 | $ 30,520 |
Less: Selling and administrative | ||
Fixed | $ 6,400 | $ 6,400 |
Variable | $ 14,080 | $ 14,080 |
Net income | $ (2,920) | $ 10,040 |
Q2 | ||
Yes, It is different due to change in manufacturing cost and no. of cakes produced. | ||
Q3 | ||
Yes, it is different due to change in manufacturing cost and no. of cakes produced. |