Question

Lavender Inc has the following information for its first year of operations: Units produced Units sold Unit sales price Direct material per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead Variable selling expenses Fixed selling and administrative expenses 4,800 3,840 $ 210.00 $ 42.00 $ 52.50 $ 10.50 $120,000 $ 10.50 $ 27,000 a. Prepare Lavender's full absorption costing income statement. (Do not round your intermediate calculations. Round your answers to nearest dollar amounts.)

Answer 1

	Working Notes : 1
	Unit Produced =	$                          4,800	Units
	Unit Sold =	$                          3,840	Units
	Closing Stock	$                             960	Units
	Selling Price Per unit	$                       210.00	Per Units
	Sales Value	$                    8,06,400
	Working Notes : 2
	CALCUALTION OF cost of production units by using absorption and variable Costing
	Particulars	Absorption Costing Amount	Variable Costing Amount
	Direct Material Per unit	$                          42.00	$                          42.00
	Direct Labour Per Unit	$                          52.50	$                          52.50
	Vairable Manufacturing Overhead	$                          10.50	$                          10.50
	Fixed Manufacturing Overhead ($ 120,000 / 4800 Units)	$                          25.00	$                                 -
	Cost of Production per unit	$                       130.00	$                       105.00
	SOLUTION A)
	ABOSRPTION COSTING INCOME STATEMENTS	Absorption Costing
	Particulars	Amount
	Sales	$                    8,06,400
	Cost of Goods Sold
	Beginning inventory	$                                 -
	Cost of Goods Manufactured (4,800 Units X $ 130 Per unit)	$                    6,24,000
	Less: Ending Inventory (960 units $ 105.00 Per Unit)	$                    1,24,800
	Cost of Goods Sold	$                    4,99,200
	Gross Profit	$                    3,07,200
	Marketing Expenses - Fixed	$                       27,000
	Marketing Expenses - Variable (3,840 Units X $ 10.50)	$                       40,320
	Operating Income	$                    2,39,880
	SOLUTION B)
	VARIABLE COSTING INCOME STATEMENTS	Variable Costing
	Particulars	Amount
	Sales	$                    8,06,400
	Cost of Goods Sold
	Beginning inventory	$                                 -
	Cost of Goods Manufactured (4,800 Units X $ 105.00 Per unit)	$                    5,04,000
	Less: Ending Inventory (960 units $ 105.00 Per Unit)	$                    1,00,800
	Cost of Goods Sold	$                    4,03,200
	Variable Marketing Expenses	$                       40,320
	Gross Profit	$                    3,62,880
	Less: Fixed Manufacturing overhead	$                    1,20,000
	Less : Fixed Marketing Expenses	$                       27,000
	Operating Income	$                    2,15,880