Question

Exercise 06-4 Variable costing income statement LO P2 Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,075 kayaks and sold 825 at a price of $1,075 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (825 x $1,075) Cost of goods sold (825 * $475) Gross margin Selling and administrative expenses Net income $ 886,875 391,875 495,000 210,000 $ 285,000 Additional Information a. Product cost per kayak totals $475, which consists of $375 in variable production cost and $100 in fixed production cost-the latter amount is based on $107.500 of fixed production costs allocated to the 1,075 kayaks produced b. The $210,000 in selling and administrative expense consists of $85,000 that is variable and $125,000 that is fixed. Required: 1. Prepare an income statement for the current year under variable costing 2. Fill in the blanks: Complete this question by entering your answers in the tabs below.

Answer 1

profit as per variable costing method is $260,000

KENZI KAYAKING Variable Costing Income Statement - Particulars Acaput Amomt Sales → 825 x $1075 886.875 Less: Variable costs. variable Production costs 309 375 825 × $375 variable selling & ad minEng 85.000 Contribution margina (394,375) 492,500 LESS:- Fixed Fimed Fixed Costs Production costs Selling Expenses 107500 38,000 125,000 (232.500) 260.000 Profit Requirement 2 Profit as per variable Costing Method = $ 260,000 Profit as per absorption Costing method = $285,000 Difference $ 25,000 The Dollar Difference in variable costing Income & absorption costing income = 828 - 825 mits X $30.30 p.u of Fined overhed

Under variable costing method, total fixed expenditure incurred will be reduced from contribution