Question

Required information (The following information applies to the questions displayed below.] Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. 330 per unit 100, 000 units 103, 250 units 3,250 units $ 438,750 243,750 682,500 $ Sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs Variable (3,250 units x $135) Fixed (3,250 units X $75) Total Manufacturing costs this year Direct materials Direct labor Overhead costs this year Variable overhead Fixed overhead Selling and administrative costs this year Variable Fixed 50 per unit 64 per unit $3,200,000 $7,400,000 $1,450,000 4,200,000

Answer 1

1
OAK MART COMPANY
Variable Costing Income Statement
Sales		34072500	=103250*330
Less: Variable costs
Beginning inventory:
Variable costs	438750
Manufacturing cost this year
Direct materials	5000000		=100000*50
Direct labor	6400000		=100000*64
Variable overhead costs	3200000
Total variable costs available	15038750
Less: Ending finished goods inventory	0
Variable cost of goods sold	15038750
Variable selling and administrative expenses	1450000
Total variable costs		16488750
Contribution margin		17583750
Less: Fixed expenses
Fixed selling and administrative costs	4200000
Fixed overhead costs	7400000
Total fixed expenses		11600000
Net income (loss)		5983750
2
OAK MART COMPANY
Absorption Costing Income Statement
Sales		34072500
Less: Cost of goods sold
Beginning inventory	682500
Manufacturing costs this year:
Direct materials	5000000
Direct labor	6400000
Variable overhead costs	3200000
Fixed overhead costs	7400000
Less: Ending inventory	0
Cost of goods sold		22682500
Gross margin		11390000
Selling general and administrative expenses
Fixed selling and administrative costs	4200000
Variable selling and administrative expenses	1450000
Total fixed expenses		5650000
Net income (loss)		5740000
Net income under variable costing is higher than net income under absorption costing by:		243,750
Number of units added to (subtracted from) inventory		3,250
Fixed overhead cost per unit		75
Fixed costs added to (subtracted from) inventory		243750