Question

Absorption and Variable Costing Comparisons: Sales Exceed Production
Wright Development purchases, develops, and sells commercial building sites. As the sites are sold, they are cleared at an average cost of $2,500 per site. Storm drains and driveways are also installed at an average cost of $5,500 per site. Selling costs are 10 percent of sales price. Administrative costs are $420,000 per year. During 2016, the company bought 1,000 acres of land for $5,000,000 and divided it into 200 sites of equal size. The average selling price per site was $85,000 during 2016 when 50 sites were sold. During 2017, the company purchased and developed another 1,000 acres, divided into 200 sites. The purchase price was again $5,000,000. Sales totaled 300 sites in 2017 at an average price of $85,000.

Required a. Prepare 2016 and 2017 functional income statements using absorption costing.

Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers.

Wright Development
Functional Income Statements
For the Years 2016 and 2017
	2016	2017
Sales	$Answer	$Answer
Cost of sales	Answer	Answer
Gross profit	Answer	Answer
Selling and administrative expenses:	Answer	Answer
Net income (loss)	$Answer	$Answer

b. Prepare 2016 and 2017 contribution income statements using variable costing.

Use a negative sign only to indicate a net loss for income. Otherwise, do not use negative signs with your answers.

Wright Development
Contribution Income Statements
For the Years 2016 and 2017
	2016	2017
Sales	$Answer	$Answer
Variable costs	Answer	Answer
Contribution margin	Answer Incorrect Mark 0.00 out of 1.00	Answer
Fixed expenses	Answer	Answer
Net income (loss)	$Answer	$Answer

Answer 1