Question

Limonade produced 11,000 cases of powdered drink mix and sold 10,000 cases in April 2010. The sale price was $25, variable costs were $10 per case ($8 manufacturing and $2 selling & administrative) and total fixed costs were $75,000 ($55,000 manufacturing and $20,000 selling & administrative). The company had no beginning inventory. Prepare the April income statement using variable costing.

Answer 1

Variable Costing Income statement
Sales ( 10,000 x 25)	250,000
Less:
Variable manufacturing costs ( 10,000 x 8)	-80,000
Variable selling and administrative costs ( 10,000 x 2)	-20,000
Contribution Margin	150,000
Less:
Fixed Manufacturing costs	-55,000
Fixed selling and administrative costs	-20,000
Operating Income	$75,000

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