Question

During the most recent year, Osterman Company had the following data:

Units in beginning inventory	---
Units produced	11,350
Units sold ($50 per unit)	9,400
Variable costs per unit:
Direct materials	$10
Direct labor	$5
Variable overhead	$3
Fixed costs:
Fixed overhead per unit produced	$4
Fixed selling and administrative	$138,500

1. Calculate the cost of goods sold under absorption costing.

The cost of goods sold under the absorption costing method is ----------------------

2. Prepare an income statement using absorption costing. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Question not attempted.

Score: 0/51

Osterman Company

Absorption-Costing Income Statement

For the Most Recent Year

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Answer 1

1. The cost of goods sold under the absorption costing method             [Refer working note]	$206,800
Osterman Company
Absorption-Costing Income Statement
For the Most Recent Year
Sales                                     [Units sold x Selling price per unit = 9,400 units x $50 per unit]	$470,000
Less: Cost of goods Sold     [Units sold x Unit cost = 9,400 units x $22]	$206,800
Gross Margin                       [Sales - Cost of Goods Sold = $470,000 - $206,800]	$263,200
Less: Selling and Administrative expenses	$138,500
Operating income                 [$263,200 - $138,500]	$124,700

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Working note - Calculation of cost of goods sold under absorption costing
Direct material per unit	$10
Direct labor per unit	$5
Variable overhead per unit	$3
Fixed overhead per unit	$4
Unit cost       [$10 + $5 + $3 + $4]                   (a)	$22
Number of units sold                                         (b)	9400
Cost of Goods Sold                                           (a x b)	$206,800