Question

In: Accounting

On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...

On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:

Units
Production 50,000
Sales ($18 per unit) 42,000
Inventory, January 31 8,000
Manufacturing costs:
   Variable $575,000
   Fixed 80,000
     Total $655,000
Selling and administrative expenses:
   Variable $35,000
   Fixed 10,500
     Total $45,500

a. Prepare an income statement using absorption costing.

Townsend Co.
Absorption Costing Income Statement
For Month Ended January 31, 20--
$
Cost of goods sold:
$
$
Income from operations $

b. Prepare an income statement using variable costing.

Townsend Co.
Variable Costing Income Statement
For Month Ended January 31, 20--
$
Variable cost of goods sold:
$
$
$
Fixed costs:
$
Income from operations $

Solutions

Expert Solution

product cost = 655000/50000= 13.1
Absorption costing income statement
Sales (42,000*18) 756000
cost of goods sold:
Cost of goods manufactured 655000
less, inventory jan 31 (8000*13.10) 104800
cost of goods sold: 550200
gross profit 205800
less:Selling and administrative expense 45,500
net income 160,300
Variable costing income statement
sales 756,000
variable cost of goods sold
cost of goods manufactued 575,000
less inventory , jan 31 (575000/50000)*8000 92000
variable cost of goods sold 483,000
manufacturing margin 273,000
less variable selling expense 35,000
contribution margin 238,000
fixed costs
fixed manufacturing costs 80,000
fixed selling and administrative costs 10,500
90,500
net income 147,500

Related Solutions

On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: Units Production 50,000 Sales ($18 per unit) 42,000 Inventory, January 31 8,000 Manufacturing costs: Variable $575,000 Fixed 80,000 Total $655,000 Selling and administrative expenses: Variable $35,000 Fixed 10,500 Total $ 45,500 Labels Fixed costs For Month Ended January 31, 20-- Amount Descriptions Contribution margin Cost of goods manufactured Cost of goods...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: Units Production 50,000 Sales ($18 per unit) 42,000 Inventory, January 31 8,000 Manufacturing costs:    Variable $575,000    Fixed 80,000      Total $655,000 Selling and administrative expenses:    Variable $35,000    Fixed 10,500      Total $45,500 a. Prepare an income statement using absorption costing. Townsend Co. Absorption Costing Income Statement For Month Ended January 31, 20-- $...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: Units Production 50,000 Sales ($18 per unit) (42,000) Inventory, January 31 8,000 Manufacturing costs:    Variable $575,000    Fixed 80,000      Total $655,000 Selling and administrative expenses:    Variable $35,000    Fixed 10,500      Total $45,500 a. Prepare an income statement using absorption costing. Townsend Co. Absorption Costing Income Statement For the Month Ended January 31 $...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at...
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: Units Production 50,000 Sales ($18 per unit) 42,000 Inventory, January 31 8,000 Manufacturing costs:    Variable $575,000    Fixed 80,000      Total $655,000 Selling and administrative expenses:    Variable $35,000    Fixed 10,500      Total $45,500 a. Prepare an income statement using absorption costing. Townsend Co. Absorption Costing Income Statement For Month Ended January 31, 20-- $...
Sunderland Company commenced business operations on January 1, 2017. During its first two years of operations,...
Sunderland Company commenced business operations on January 1, 2017. During its first two years of operations, the company completed transactions involving sales on credit, accounts receivable collections, and bad debts. On December 31, 2017, its Accounts Receivable account and Allowance for Doubtful Accounts account had a balance of $2,090,000 and $37,620 respectively. The transactions for 2018 are summarized as follows. a. Sold $2,845,000 of merchandise (that had cost $1,730,000) on credit, terms n/30. b. Wrote off $95,300 of uncollectible accounts...
Question 2 Hydropure Ltd commenced operations at the beginning of the current year. One of the...
Question 2 Hydropure Ltd commenced operations at the beginning of the current year. One of the company’s products, an alkaline antioxidant water filter, sells for $299 per unit. Information related to the current year’s activities are as follows: $ Variable costs per unit: Direct materials 40 Direct labour   74 Manufacturing overhead 96 Annual fixed costs: Manufacturing overhead 700,000    Selling and administrative 880,000 Production and sales activity: Production (units) 25,000 Sales (units) 20,000 Hydropure Ltd carries its finished goods inventory...
On 1 January 20X7, Change Incorporated commenced business operations. At 31
On 1 January 20X7, Change Incorporated commenced business operations. At 31 December 20X9, the following information relates to Chang: 20X7 20X8 20X9 Earnings (loss) before tax $ 334,900 $ (486,100 ) $ 785,000 Tax rate (enacted in each year) 30 % 35 % 40 % Depreciation expense (asset cost was $730,000) 63,000 63,000 63,000 Capital cost allowance 219,000 0 91,000 Dividends received (nontaxable) 41,000 66,500 66,500 Golf club dues 10,900 10,900 10,900 Required:1. Prepare journal entries to record tax for...
Werewolf’s Manufacturing began its operations on January 1 of the current year. Werewolf produced 10,000 units...
Werewolf’s Manufacturing began its operations on January 1 of the current year. Werewolf produced 10,000 units during the year, sold 8,000 units at an average cost of $22 per unit, and had 2,000 units in ending inventory. Variable production cost were $14 per unit, variable selling expenses were $2 per unit, fixed overhead totaled $12,000, and fixed selling and administrative expenses totaled $30,000. Werewolf’s Manufacturing began its operations on January 1 of the current year. Werewolf produced 10,000 units during...
Assume that Besley Golf Equipment commenced operations on January 1, 2015, and it was granted permission...
Assume that Besley Golf Equipment commenced operations on January 1, 2015, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 15 years, but in December 2015 management realized that the assets would last for only 10 years. The firm's accountants plan to report the 2015 financial statements based on this new information. How would the new depreciation assumption affect the company’s financial...
Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1....
Rios Financial Co. is a regional insurance company that began operations on January 1, Year 1. The following transactions relate to trading securities acquired by Rios Financial Co., which has a fiscal year ending on December 31: Record these transactions on page 10: Year 1 Feb. 1. Purchased 6,600 shares of Caldwell Inc. as a trading security at $43 per share plus a brokerage commission of $660. May 1. Purchased 1,800 shares of Holland Inc. as a trading security at...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT