Question

Mangra Co planned and actually manufactured 200,000 units in 2018, its first year of operation. Variable manufacturing cost waz $20 per unit produced. Variable S&A expense was $10 per unit sold. Planned and actual fixed manufacturing costs were $600,000. Fixed S&A cost was $400,000. 120,000 units were sold at $40 per unit.

Prepare an Absorption Costing Income Statement

Answer 1

Absorbtion Costing Income Statement:
Sales								$       48,00,000
Less:Costs of goods sold								$       27,60,000
Gross Profit								$       20,40,000
Less:Operating expenses
Variable S&A expenses							$     12,00,000
Fixed S&A expenses							$        4,00,000	$       16,00,000
Net Profit								$          4,40,000
Workings:
1)
Variable Manufacturing expense				2,00,000	x	$    20.00	=	$       40,00,000
Fixed Manufacturing expenses								$          6,00,000
Total Manufacturing expenses								$       46,00,000
÷ Total Units manufactured								2,00,000
Manufacturing expense per unit						a		$ 23.00
Unit sold						b		1,20,000
Cost of goods sold						a*b		$       27,60,000
2)
Variable S&A expense				1,20,000	x	$    10.00	=	$       12,00,000
3)
Sales		120000	x	40	=			$       48,00,000