Question

Exercise 19-3 (continued) Part 2 ..... 24,500,000 14,000,000 SIMS COMPANY Absorption Costing Income Statement Sales (70,000 units x $350 per unit) Cost of goods sold (70,000 units x $200 per unit").... Gross profit Selling and administrative costs ($770,000+ $4,250,000). Net income "Direct materials. per unit Direct labor...... per unit Variable overhead ($3,000,000/100,000 per unit units)................ Fixed overhead ($7,000,000/100,000 units)... per unit Total absorption cost per unit... per unit

Answer 1

Answer 1.

SIMS COMPANY Variable Costing Income Statement Sales $ 24,500,000 Less: Variable Expenses Variable Manufacturing Expense $ 9,100,000 Variable Selling and Administrative $ 770,000 Total Variable Expenses $ 9,870,000 Contribution Margin $ 14,630,000 Less: Fixed Expenses Fixed Manufacturing Expenses $ 7,000,000 Fixed Selling and Administrative $ 4,250,000 Total Fixed Expenses $ 11,250,000 Net Income $ 3,380,000 Direct materials Direct labor Variable overhead Total absorption cost per unit 40.00 per unit 60.00 per unit 30.00 per unit 130.00 per unit

Answer 2.

SIMS COMPANY Absorption Costing Income Statement Sales $ 24,500,000 Less: Cost of Goods Sold $ 14,000,000 Gross Profit $ 10,500,000 Less: Selling and Administrative Costs $ 5,020,000 Net Income $ 5,480,000 Direct materials Direct labor Variable overhead Fixed overhead Total absorption cost per unit 40.00 per unit 60.00 per unit 30.00 per unit 70.00 per unit 200.00 per unit

Answer 3.

Net income under both methods will be equal if number of units produced and sold are equal.