Question

The following information pertains to the first year of operation for Crystal Cold Coolers Inc.:

Number of units produced		2,800
Number of units sold		2,600
Unit sales price	$	340
Direct materials per unit	$	65
Direct labor per unit	$	40
Variable manufacturing overhead per unit	$	10
Fixed manufacturing overhead per unit ($224,000/2,800 units)	$	80
Total variable selling expenses ($14 per unit sold)	$	36,400
Total fixed general and administrative expenses	$	59,000

Required:

Prepare Crystal Cold’s full absorption costing income statement and variable costing income statement for the year.

Variable costing statement please

Answer 1

Answer-

Crystal Cold Coolers Inc.
Contribution Margin statement (Using variable costing approach)
Particulars			Amount
			$
Sales (a)	2600 units*$340 per unit		884000
Less:- Variable cost of goods sold (b)
Opening inventory
Add:- Variable cost of goods manufatured		322000
Direct materials	2800 units*$65 per unit	182000
Direct labor	2800 units*$40 per unit	112000
Variable factory overhead	2800 units*$10 per unit	28000
Variable cost of goods available for sale		322000
Less:- Closing inventory	100 units*$115 per unit	11500	310500
Gross contribution margin C= a-b			573500
Less:-Variable selling exp.	2600 units*$14 per unit		36400
Contribution margin			537100
Less:- Fixed costs
Manufacturing overhead			224000
General & administrative exp.			59000
Net Income			254100

Explanation-Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$65+$40+$10

= $115 per unit

Answer-

Crystal Cold Coolers Inc.
Contribution Margin statement (Using absorption costing approach)
Particulars			Amount
			$
Sales (a)	2600 units*$340 per unit		884000
Less:- cost of goods sold (b)
Opening inventory
Add:- cost of goods manufatured		322000
Direct materials	2800 units*$65 per unit	182000
Direct labor	2800 units*$40 per unit	112000
Variable factory overhead	2800 units*$10 per unit	28000
Fixed overhaed		224000
Cost of goods available for sale		546000
Less:- Closing inventory	100 units*$195 per unit	19500	526500
Gross contribution margin C= a-b			357500
Less:-Variable selling exp.	2600 units*$14 per unit		36400
Contribution margin			321100
Less:- Fixed costs
General & administrative exp.			59000
Net Income			262100

Explanation- Unit product cost under Absorption costing:-Direct materials + Direct Labor+ Variable manufacturing overhead + fixed manufacturing overhead

=$65+$40+$10+$80

= $195 per unit

Unit fixed manufacturing overhead= fixed manufacturing overhead/No. of units produced

=$224000/2800 units

=$60 per unit