Question

Serial Problem Business Solutions P2, P3

Santana Rey expects sales of Business Solutions’s line of computer workstation furniture to equal 300 workstations (at a sales price of $3,100 each) for 2018. The workstations’ manufacturing costs include the following.

Direct materials $740 per unit

Direct labor $360 per unit

Variable overhead $90 per unit

Fixed overhead $24,000 per year

The selling expenses related to these workstations follow

Variable selling expenses	$	35	per unit
Fixed selling expenses	$	3,900	per year
Santana is considering how many workstations to produce in 2018. She is confident that she will be able to sell any workstations in her 2018 ending inventory during 2019. However, Santana does not want to overproduce as she does not have sufficient storage space for many more workstations. Required: 1. Complete the following income statements using absorption costing.

	Production Volume	Production Volume
COGS	300 Workstations	320 Workstations
Direct Materials Per Unit
Direct Labor Per Unit
Variable Overhead Per Unit
Fixed Overhead Per Unit
COGS Per Unit
Number of Workstations Sold
Total COGS

Business Solutions
Absorption Costing Income Statement
	Production Volume	Production Volume
Sales Volume- 320 Workstations	300 Workstations	320 Workstations
Sales
COGS
Gross Margin
Selling G&A Expenses
Net Income (Loss)

Business Solutions
Variable Costing Income Statement
Production Volume Units	300 Workstations	320 Workstations
Sales Volume Units	300 Workstations	300 Workstations
Sales
Less: Variable Costs
Direct Materials
Direct Labor
Variable Factory Overhead
Variable Selling Expense
Total Variable Costs
Contribution Margin
Less: Fixed Expenses
Fixed Overhead Costs
Fixed Selling Expense
Total Fixed Costs
Net Income (Loss)

Answer 1

1) COGS Amount :
	Production volume	Production volume
COGS	300 workstations	320 workstations
DM per unit	740	740
DL per unit	360	360
V OH per unit	90	90
F OH per unit	80	75
COGS per unit	1270	1265
Number of Workstations sold	300	300
Total COGS	381000	379500
2)Absorption costing income statement:
Production volume	300 workstations	320 workstations
Sales Volume	300 workstations	300 workstations
Sales	930000	930000
COGS	381000	379500
Gross Margin	549000	550500
Selling G&A Expenses	14400	14400
Net Income	534600	536100
3) Variable Costing Income Statement:
Production Volume units	300 workstations	320 workstations
Sales volume units	300 workstations	300 workstations
Sales	930000	930000
Less: Variable costs:
DM	222000	222000
DL	108000	108000
V F OH	27000	27000
V S Exp	10500	10500
Total Variable costs	367500	367500
Contribution Margin	562500	562500
Less: Fixed Expenses:
Fixed OH Costs	24000	24000
Fixed Selling Exp	3900	3900
Total Fixed Costs	27900	27900
Net Income	534600	534600