Question

ExerAde produced 11,000 cases of powdered drink mix and sold 9,000 cases in April 2016. The sales price was $29, variable costs were $10 per case ($8 manufacturing and $2 selling and administrative), and total fixed costs were $75,000 ($55,000 manufacturing and $20,000 selling and administrative). The company had no beginning Finished Goods Inventory. Requirements 1. Prepare the April income statement using variable costing. 2. Determine the product cost per unit and the total cost of the 2,000 cases in Finished Goods Inventory as of April 30 Requirement 1. Prepare the April income statement using variable costing. ExerAde Income Statement (Variable Costing) Month Ended April 30, 2016

Answer 1

Solution -

Income Statement (Variable costing) Particulars Amount 9000 $29 9000 $10 Sales 261000 Variable cost 90000 171000 Contribution Fixed cost 55000 20000 75000 Net operating income 96000 Product cost per unit Variable cost $10 $8 $2 Manufacturing cost Selling & administrative cost Total cost $10 Total cost 2000*$10 = $20000 Note Fixed manufacturing & selling cost would not be included for the calculation of 2000 cases as it is irrelevent for the finished goods calculation because it is unavoidable cost and its cost has been already included in the income statement