Question

What is the answer for #2? How do you do it?

SNA Company makes one type of power washer. The power washer sells for $300 ...8,000 Data for the last year's operations follow: Units in beginning inventory......................0 Units produced................................. 10,000 Units sold................................... Units in ending inventory.....................2,000 Variable costs per unit: Direct materials.... ....$40 Direct labor. ...........$25 Variable Manufacturing overhead......$15 Variable selling and administrative.......$10 Fixed costs: Fixed manufacturing overhead....$300,000 Fixed selling and administrative... $403,000 Assume the company uses variable costing. Required: 1. Prepare the contribution format income statement for the year in good form (dollar amounts only). 2. What is NOT if absorption costing was used (show your work)?

Answer 1

SNA Company Statement of Net Operating Income Absorption Costing Sales Cost of Goods sold Gross Margin Selling and administrative Expenses Variable selling adnd administrative Expenses | $ 80,000 Fixed selling and administrative Expenses $ 403,000 Net Operating Income $2,400,000 $ 880,000 $1,520,000 $ 483,000 $1,037,000 Working Notes : Caluclation of Unit Product Cost Direct Materials Direct labor Variable Manufacturing overhead Fixed manufacturing Overhead Unit Product Cost 40 25 15 30 110 $ Fixed manufacturing overhead cost per unit = $300,000/10,000 = $30 Cost of Goods sold = 8,000*$110 = $880,000 Sales = 8,000*$300 = $2,400,000 Variable Selling and administrative = 8,000*$10 = $80,000