Question
In: Accounting
On October 31, the end of the first month of operations, Morristown & Co. prepared the...
On October 31, the end of the first month of operations,
Morristown & Co. prepared the following income statement based
on absorption costing:
| Morristown & Co. | ||||
| Absorption Costing Income Statement | ||||
| For Month Ended October 31, 20-- | ||||
| Sales (2,600 units) | $117,000 | |||
| Cost of goods sold: | ||||
| Cost of goods manufactured | $85,500 | |||
| Less ending inventory (400 units) | 11,400 | |||
| Cost of goods sold | 74,100 | |||
| Gross profit | $42,900 | |||
| Selling and administrative expenses | 21,500 | |||
| Income from operations | $21,400 | |||
If the fixed manufacturing costs were $42,900 and the variable selling and administrative expenses were $14,600, prepare an income statement using variable costing. Filling in the blanks with the following terms chart.
-Fixed manufacturing costs
-Less ending inventory
-Sales
-Variable cost of goods manufactured
-Wages Expense
-Fixed selling and administrative expenses
-Variable cost of goods sold
-Less ending inventory
-Utilities Expense
-Manufacturing margin
-Contribution margin
| ____________ | $ | |
| Variable cost of goods sold: | ||
| ____________ | $ | |
| ___________ | $ | |
| ___________ | $ | |
| ___________ | $ | |
| ___________ | $ | |
| ____________ | $ | |
| Fixed costs: | ||
| ____________ | $ | |
| ___________ | $ | |
| Income from operations | $ |
Solutions
Expert Solution
Notes -
1, Manufacturing costs - Quantity of goods manufactured = Sales + Closing stock (no info about opening stock is provided)
= 2600 + 400 = 3000 units
Cost of goods manufactured = 85,500 = 42,900 Fixed (Given in the question) + 42,600 Variable (85,500-42,900)
Thus, per unit cost (for 3000 units) = $14.3 Fixed + $14.2 Variable.
This can be cross checked. Value of closing inventory (400 units) = 400*14.3 + 400*14.2 = 11,400 (as per question).
2. Selling and admin expenses - Total = 21,500 = 14,600 Variable (given) + 6,900 Fixed (21,500-14,600)
Thus, variable per unit (For 2600 units) = 5.62
Solution -
| Sales | $117,000 | |
| Variable Cost of Goods Sold: | ||
| Variable cost of goods manufactured (3000*14.2) | $42,600 | |
| Less: Ending Inventory (400*14.2) | $5,680 | |
| Manufacturing Margin | $80,080 | |
| Variable Selling and Admin exp (2600*5.62) | $14,600 | |
| Contribution Margin | $65,480 | |
| Fixed Costs: | ||
| Manufacturing cost | $42,900 | |
| Selling and Admin cost | $6,900 | |
| Income from Operations | $15,680 |
Do let me know in case of any queries.
ekkarill92 answered 3 years agoRelated Solutions
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