In: Accounting
The Zippo controller provides you the following information for the past year:
Using the above information and assuming the fixed manufacturing cost allocation rate is $2.50 per unit, prepare an income statement using absorption accounting.
What is the operating income under variable costing? Provide a reconciliation with operating income under absorption costing.
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Zippo controller | |||
Workings for absorption costing | Units | Note | |
Units sold | 200,000.00 | ||
Add: Ending Inventory | 24,000.00 | ||
Less: Opening Inventory | (12,000.00) | ||
Units produced | 212,000.00 | A | |
Answer c | Amount $ | ||
Fixed manufacturing cost allocation rate | 2.50 | ||
Add: Variable manufacturing costs per unit | 13.00 | ||
Total manufacturing costs per unit | 15.50 | B | |
Units produced | 212,000.00 | See A | |
Cost of goods manufactured | 3,286,000.00 | D=B*A | |
Ending Inventory | 24,000.00 | E | |
Cost of Ending Inventory | 372,000.00 | F=E*B | |
Opening Inventory | 12,000.00 | G | |
Cost of Opening Inventory | 186,000.00 | H=G*B | |
Units sold | 200,000.00 | I | |
Sell price per unit | 27.00 | J | |
Sales | 5,400,000.00 | K=I*J | |
Variable marketing costs per unit | 4.00 | L | |
Variable marketing costs | 800,000.00 | M=L*I | |
Fixed manufacturing cost allocation rate | 2.50 | N | |
Units produced | 212,000.00 | See A | |
Fixed manufacturing cost allocated | 530,000.00 | C=N*A | |
Less: Actual Fixed costs | 520,000.00 | ||
Over applied fixed cost | 10,000.00 | O | |
Absorption costing income statement | Amount $ | Amount $ | Note |
Sales | 5,400,000.00 | See K | |
Less: Costs of goods sold | |||
Cost of Opening Inventory | 186,000.00 | See H | |
Add: Cost of goods manufactured | 3,286,000.00 | See D | |
Cost of goods available for sale | 3,472,000.00 | ||
Less: Cost of ending Inventory | 372,000.00 | See F | |
Costs of goods sold | 3,100,000.00 | ||
Less: Over applied fixed cost | 10,000.00 | See O | |
Adjusted Costs of goods sold | 3,090,000.00 | ||
Gross Profit | 2,310,000.00 | ||
Less: Selling and admin expense | |||
Variable marketing costs | 800,000.00 | See M | |
Fixed Selling and admin expense | 360,000.00 | 1,160,000.00 | |
Operating Income | 1,150,000.00 | ||
Workings for Variable costing | Amount $ | Note | |
Variable manufacturing costs per unit | 13.00 | P | |
Ending Inventory | 24,000.00 | See E | |
Cost of Ending Inventory | 312,000.00 | Q=P*E | |
Units produced | 212,000.00 | See A | |
Cost of goods manufactured | 2,756,000.00 | R=P*A | |
Opening Inventory | 12,000.00 | See G | |
Cost of Opening Inventory | 156,000.00 | S=P*G | |
Variable costing income statement | Amount $ | Amount $ | Note |
Sales | 5,400,000.00 | See K | |
Less: Variable costs of goods sold | |||
Cost of Opening Inventory | 156,000.00 | See S | |
Add: Cost of goods manufactured | 2,756,000.00 | See R | |
Cost of goods available for sale | 2,912,000.00 | ||
Less: Cost of ending Inventory | 312,000.00 | See Q | |
Costs of goods sold |
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