Question
In: Accounting
Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit...
Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit was $200 and data for variable and fixed costs were as follows:
Cost Schedule:
Variable Costs:
Direct Material
$28
Direct Labour
$35
Variable Manufacturing Overhead
$17
$80
Fixed Costs:
Manufacturing Overhead
$225,000
Advertising
45,000
Administrative
150,000
$420,000
Required:
i) Compute the number of units sold in 2017, using the equation method.
ii) Using the sales units calculated in (i), prepare a contribution margin income statement for the year ended December 31, 2017, detailing the components of total fixed costs, and clearly showing contribution and net income.
Solutions
Expert Solution
| Ans.1 | Number of units sold = 3680 | |||||
| *Calculation: | ||||||
| Sales = Variable cost + Fixed cost + Profit | ||||||
| (Sales units * Selling price) = Variable cost + fixed cost + Profit | ||||||
| (Sales units * 200) = 16000 + 420000 + 300000 | ||||||
| sales units * 200 = 736000 | ||||||
| Sales units = 736000 / 200 | ||||||
| Sales units = 3680 | ||||||
| *Calculation of total variable cost: | ||||||
| Direct material (28*200) | 5600 | |||||
| Direct labor (35*200) | 7000 | |||||
| Variable manufacturing overhead (17*200) | 3400 | |||||
| Total variable cost | 16000 | |||||
| *Calculation of total fixed cost: | ||||||
| Manufacturing overhead | 225000 | |||||
| Advertising | 45000 | |||||
| Administration | 150000 | |||||
| Total Fixed Costs | 420000 | |||||
| Ans.2 | GRANGE MANUFACTURING COMPANY | |||||
| Contribution margin income statement | ||||||
| For the year ended Dec. 31, 2017 | ||||||
| PARTICULARS | AMOUNT | |||||
| Sales Revenue (3680*200) | 736000 | |||||
| Less: Variable cost | ||||||
| Direct material | 5600 | |||||
| Direct labor | 7000 | |||||
| Variable manufacturing overhead | 3400 | |||||
| Total variable cost | 16000 | |||||
| Contribution margin | 720000 | |||||
| Less: Fixed costs: | ||||||
| Manufacturing overhead | 225000 | |||||
| Advertising | 45000 | |||||
| Administration | 150000 | |||||
| Total Fixed cost | 420000 | |||||
| Net income | 300000 | |||||
| *Each component of Variable cost & fixed cost is already calculated in Ans.1. | ||||||
| *Contribution margin = Sales revenue - Total variable costs | ||||||
| *Net Income = Contribution margin - Total fixed costs. | ||||||
ekkarill92 answered 2 years agoRelated Solutions
Grange Manufacturing Company had net income of $300,000 in 2017 when the selling price per unit...
Grange Manufacturing Company had net
income of $300,000 in 2017 when the selling price per unit was $200
and data for variable and fixed costs were as follows:
Cost Schedule:
Variable Costs:
Direct Material
$28
Direct Labour
$35
Variable Manufacturing Overhead
$17
$80
Fixed Costs:
Manufacturing Overhead
$225,000
Advertising
45,000
Administrative
150,000
$420,000
i) Compute
the number of units sold in 2017, using the equation
method.
iv) Calculate
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Grange manufacturing company had net income of $300,000 in 2017 when the selling price per unit...
Grange manufacturing company had net income of $300,000 in 2017
when the selling price per unit was $200 and data for variable and
fixed costs were as follows:
Cost Schedule:
Variable Costs:
Direct Material $28 Direct Labour $35
Variable Manufacturing Overhead $17
Total $80
Fixed Costs:
Manufacturing Overhead $225,000
Advertising 45,000
Administrative 150,000
Total $420,000
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