Question

Summarized data for Walrus Co. for its first year of operations are:

$

.

Answer 1

A. Absorption Costing

Sales Revenue		$   10,500,000
Cost of Goods Sold
Direct Material	$      1,680,000
Direct Labor	$      1,500,000
Variable Overhead	$         840,000
Fixed Overhead	$         300,000
Cost of goods available for sale	$      4,320,000
Less ending inventory	$         720,000
Cost of Goods Sold		$      3,600,000
Gross Profit		$     6,900,000
Selling and Administrative Expenses		$         690,000
Net Operating Income		$     6,210,000

B. Variable Costing

Sales Revenue		$   10,500,000
Variable Cost of Goods Sold
Direct Material	$      1,680,000
Direct Labor	$      1,500,000
Variable Overhead	$         840,000
Variable cost of goods available for sale	$      4,020,000
Less ending inventory	$         670,000
Variable Cost of Goods Sold		$      3,350,000
Variable Selling and Administrative Expenses		$         250,000
Contribution Margin		$     6,900,000
Fixed Costs
Manufacturing Overhead	$         300,000
Selling and Administrative Expenses	$         440,000	$         740,000
Net Operating Income		$     6,160,000