Question

Exercise 19-5 Absorption costing and variable costing income statements LO P2 Rey Company's single product sells at a price of $216 per unit. Data for its single product for its first year of operations follow. 20 per unit 28 per unit Direct materials Direct labor Overhead costs Variable overhead Pixed overhead per year Selling and administrative expenses Variable Fixed Units produced and sold 6 per unit $ 160,000 per year 18 per unit $ 200,000 per year 20,000 units 1. Prepare an income statement for the year using absorption costing 2. Prepare an income statement for the year using variable costing. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the year using absorption costing. REY COMPANY Absorption Costing Income Statement < Prev 3 of 5 - Next >

Answer 1

	REY COMPANY
Aborption costing income statement
Sales					4320000
less: Cost of good sold
Direct materials				400000
Direct labor				560000
Variable overhead costs				120000
Fixed overhead costs				160,000
cost of goods sold					1,240,000
Gross margin					3,080,000
Selling and administrative expenses:
Fixed selling and administrative costs				200,000
Variable selling and administrative expenses				360000
total selling ,general and administrative expenses					560,000
Net income (loss)					2,520,000
Variable costing income statement
Sales:					4320000
less:Variable costs
Direct materials				400000
Direct labor				560000
variable overhead costs				120000
Variable selling & adm costs				360000
total variable costs					1440000
Contribution margin					2880000
less:Fixed expenses
Fixed selling and adminisrative costs				200,000
Fixed overhead costs				160,000
total fixed costs					360,000
net income (loss)					2,520,000

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