Question

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

Selling price $84

Units in beginning inventory 500

Units produced 1,900

Units sold 2,100

Units in ending inventory 300

Variable costs per unit:

Direct Materials $25

Direct Labor $10

Variable manufacturing overhead $7

Variable selling and administrative $10

Fixed costs:

Fixed manufacturing overhead $38,000

Fixed selling and administrative $21,000

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Instructions

1) Prepare a contribution format income statement for the month using variable costing

2) Prepare an income statement for the month using absorption costing

Answer 1