Question

Question 33

During 2016, Rafael Corp. produced 39,120 units and sold 39,120 for $16 per unit. Suppose the accountant for Rafael Corp. uses normal costing and uses the budgeted volume of 48,900 units. Variable manufacturing costs were $6 per unit. Annual fixed manufacturing overhead was $78,240 ($2 per unit). Variable selling and administrative costs were $2 per unit sold, and fixed selling and administrative expenses were $19,400. The company expenses production volume variance to cost of goods sold in the accounting period in which it occurs.

Prepare a normal-costing income statement for the first year of operation.

Answer 1

Rafael Corp.
Normal-Costing income statement
	$	$
Sales Revenue ( 39,120 units x $ 16 ) - ( A )		625,920
Less: Cost of goods sold;
Variable manufacturing costs (39,120 units x $ 6 )	234,720
Fixed manufacturing overhead ( 48,900 units x $ 2 )	97,800
Total cost of goods manufactured	332,520
Less: Ending inventory cost	-
Cost of goods sold ( Gross )	332,520
Less: Overapplied fixed manufacturing overhead ( $ 97,800 - $ 78,240 )	(19,560)
Cost of goods sold ( Net ) - ( B )		312,960
Gross income ( C) =( A ) - ( B )		312,960
Operating expenses;
Variable selling and administrative costs ( 39,120 units x $ 2 )	78,240
Fixed selling and administrative costs	19,400
Total operating costs ( D )		97,640
Net income ( C ) - ( D )		215,320