Question

Aspen Manufacturing Company sells its products for $35 each. The current production level is 50,000 units, although only 40,000 units are anticipated to be sold. Unit manufacturing costs are: Direct materials $7.00 Direct manufacturing labor $8.00 Variable manufacturing costs $5.00 Total fixed manufacturing costs $180,000 Marketing expenses $3.00 per unit, plus $100,000 per year Complete the income statements formatted below: a. Absorption-costing income statement: Sales Cost of goods sold Gross margin Marketing: Variable Fixed Operating income b. Variable-costing income statement: Sales Variable costs: Cost of goods sold_ _*_ Marketing Contribution margin Fixed costs: Manufacturing Marketing Operating income

Answer 1

Solution:

Absorption costing income statement
Particulars	Amount
Sales ($40,000*35)	$1,400,000.00
Cost of goods sold (40000*$23.60)	$944,000.00
Gross Profit	$456,000.00
Marketing:
Variable (40000*$3)	$120,000.00
Fixed	$100,000.00
Operating income	$236,000.00

Variable costing income statement
Particulars	Amount
Sales ($40,000*35)	$1,400,000.00
Variable costs:
Cost of goods sold (40000*$20)	$800,000.00
Marketing (40000*$3)	$120,000.00
Contribution margin	$480,000.00
Fixed costs:
Manufacturing	$180,000.00
Marketing	$100,000.00
Operating income	$200,000.00