Question

Exercise 06-5 Absorption costing and variable costing income statements LO P2 Rey Company's single product sells at a price of $219 per unit. Data for its single product for its first year of operations follow Direct materials Direct labor Overhead costs 23 per unit 31 per unit 9 per unit $253,000 per year Variable overhead Fixed overhead per year Selling and administrative expenses Variable Fixed 21 per unit $206,000 per year 23,000 units Units produced and sold 1. Prepare an income statement for the year using absorption costing 2. Prepare an income statement for the year using variable costing Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prov 1 of 1 Next

Answer 1

1
REY COMPANY
Absorption Costing Income Statement
Sales		5037000	=23000*219
Less: Cost of goods sold
Direct materials	529000		=23000*23
Direct labor	713000		=23000*31
Variable overhead costs	207000		=23000*9
Fixed overhead costs	253000
Cost of goods sold		1702000
Gross margin		3335000
Selling general and administrative expenses
Fixed selling and administrative costs	206000
Variable selling and administrative expenses	483000		=23000*21
Total selling, general and administrative expenses		689000
Net income (loss)		2646000
2
REY COMPANY
Variable Costing Income Statement
Sales		5037000	=23000*219
Less: Variable costs
Direct materials	529000
Direct labor	713000
Variable overhead costs	207000
Variable selling and administrative expenses	483000
Total variable costs		1932000
Contribution margin		3105000
Less: Fixed expenses
Fixed selling and administrative costs	253000
Fixed overhead costs	206000
Total fixed expenses		459000
Net income (loss)		2646000