In: Accounting
Exercise 6-17
Siren Company builds custom fishing lures for sporting goods
stores. In its first year of operations, 2020, the company incurred
the following costs.
Variable Costs per Unit | ||
Direct materials | $7.80 | |
Direct labor | $3.59 | |
Variable manufacturing overhead | $6.03 | |
Variable selling and administrative expenses | $4.06 | |
Fixed Costs per Year | ||
Fixed manufacturing overhead | $244,400 | |
Fixed selling and administrative expenses | $218,504 |
Siren Company sells the fishing lures for $26.00. During 2020, the
company sold 80,000 lures and produced 94,000 lures.
Prepare a variable costing income statement for 2020.
Prepare an absorption costing income statement for 2020.
Variable costing income statement :-
Particulars | calculations | amount ($) |
Sales | 80000 × 26 | 2080000 |
Less :- direct material | 80000 ×7.8 | (624000) |
Less :- direct labour | 80000 × 3.59 | (287200) |
Less :- Variable manufacturing overhead | 80000 × 6.03 | (482400) |
Less :- Variable selling and administrative expenses | 80000 × 4.06 | (324800) |
Less:- closing stock (as we have taken all the cost as per unit basis then the closing stock stock should not be deducted) | 0 | 0 |
Contribution | 361600 | |
Less :- Fixed manufacturing overhead | (244400) | |
Less :- Fixed selling and administrative expenses | (218504) | |
Net income (loss) | (101304) |
Net loss as per variable costing = 101304
Absorption costing income statement :-
Particulars | calculations | Amount ($) |
Sales | 80000 × 26 | 2080000 |
Less :- direct material | 90000 × 7.80 | (624000) |
Less :- direct labour | 90000 × 3.59 | (287200) |
Less :- variable manufacturing overhead | 90000 × 6.03 | (482400) |
Less :- variable selling and administrative expenses | 90000 × 4.06 | (324800) |
Less :- fixed manufacturing overhead | (244400) | |
Less :- fixed selling and administrative expenses expenses | (218504) | |
Add:- closing stock | 462904 × (16000 ÷ 96000) | 77151 |
Net income (loss) | 24153 |
Net loss as per absorption costing = 24153
These are all the information required to solve the above given question.
If there is any clarifications required regarding the above provided answer, please mention them in comment box.
I hope, all the above provided explanations and calculations are useful and helpful to you.
Thank you.