Question

Problems Saved Problem 2-40 Financial Statement Elements; Cost Behavior (LO 2-5, 2-6, 2-8) [The following information applies to the questions displayed below.] Mason Corporation began operations at the beginning of the current year. One of the compan refrigeration element, sells for $185 per unit. Information related to the current year's activities Variable costs per unit: Direct material Direct labor Manufacturing overhead Annual fixed costs: Manufacturing overhead Selling and administrative Production and sales activity: Production (units) Sales (units) $600,000 860, eee 24, eee 20,000 Mason carries its finished-goods inventory at the average unit cost of production and is subject to income tax rate. There was no work in process at year-end. Problem 2-40 Part 1 < Prev 6 7 8 of 12 Next >

Answer 1

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1.	Cost of Finished goods Inventory	=	$   4,88,000
2.	Net Income	=	$   2,80,000
	Workings:
	Variable direct material cost per unit	=	15
	Variable direct labor cost per unit	=	36
	Variable manufacturing overhead cost per unit	=	46
	Fixed manufacturing overhead cost per unit ($600000 / 24000 units)	=	25
	Total	=	122
	Cost of Finished goods Inventory	=	(24000 units - 20000 units) X $122
		=	$   4,88,000
	Mason Company
	Income Statement
	Sales (20000 X $185)		$ 37,00,000
Less:	Cost of Goods Sold (20000 X $122)		$ 24,40,000
	Gross Margin		$ 12,60,000
Less:	Selling and Administrative Expenses:		$   8,60,000
	Income before tax		$   4,00,000
Less:	Income tax @ 30%		$   1,20,000
	Net Income		$   2,80,000