Question

On October 31, the end of the first month of operations, Maryville Equipment Company prepared the following income statement, based on the variable costing concept:

Maryville Equipment Company Variable Costing Income Statement For the Month Ended October 31
Sales (14,100 units)			$648,600
Variable cost of goods sold:
Variable cost of goods manufactured	$286,200
Inventory, October 31 (1,800 units)	(32,400)
Total variable cost of goods sold			(253,800)
Manufacturing margin			$394,800
Variable selling and administrative expenses			(169,200)
Contribution margin			$225,600
Fixed costs:
Fixed manufacturing costs	$63,600
Fixed selling and administrative expenses	42,300
Total fixed costs			(105,900)
Operating income			$119,700

Prepare an income statement under absorption costing. Round all final answers to whole dollars.

Answer 1

Answer-

MARYVILLE EQUIPMENT COMPANY
ABSORPTION COSTING INCOME STATEMENT
FOR THE MONTH ENDED OCTOBER 31
PARTICULARS	AMOUNT	AMOUNT
Sales	$	$
Less- Cost of goods sold:		648600
Cost of goods manufactured	See note 1	349800
Less- Ending inventory	See note 2	39600
Total cost of goods sold		310200
Gross profit		338400
Less- Selling & administrative expenses
Fixed	169200
Variable	42300
Total Selling & administrative expenses		211500
Income from operations		126900

Explanation- 1)- Cost of goods manufactured = Variable cost of goods manufactured+ Fixed manufacturing costs

= $286200+$63600

=$349800

2)- Ending inventory = Ending inventory units*Unit product cost per unit under absorption costing

= 1800 units*$22 per unit

= $39600

Unit product cost per unit under absorption costing = Cost of goods manufactured/No. of units produced

= $349800/(14100 units+1800 units)

= $349800/15900 units

= $22 per unit