Question

Required information Exercise 06-9 Income statement under absorption costing and variable costing LO P1, P2 The following information applies to the questions displayed below) Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 40,000 units and sold 32,000 units at a price of $140 per unit Manufacturing costs Direct materials per unit Direct labor per unit Variable overhead per unit Fixed overhead for the year Selling and administrative costs Variable selling and administrative cost per unit Fixed selling and administrative cost per year $480,000 $109,880

Answer 1

Production Cost Per Unit Produced under Absorption Costing: 60.00 22.00 8.00 Direct Materials Per Unit Direct Labor Per Unit Variable Overhead Per Unit Fixed Manufacturing Overhead Per Unit ($480000/40000 Units) Production Cost Per Unit Under Absorption Costing 12.00 102.00 4,480,000.00 (3,264,000.00) 1,216,000.00 Income Statement Under Absorption Costing: Sales (32000 Units x $140) Less: Cost of Goods Sold (32000x$102) Gross Profit Margin Less: Selling & Administration Costs: Variable Selling Commission Expenses (32000x$10) Fixed Selling Commission Expenses Net Operating Income $ (320,000.00) (100,000.00) 796,000.00

Production Cost Per Unit Produced under Variable Costing: Direct Materials Per Unit 60.00 Direct Labor Per Unit 22.00 Variable Overhead Per Unit 8.00 Production Cost Per Unit Under Variable Costing 90.00 LA A 4,480,000.00 (2,880,000.00 1,600,000.00 Income Statement Under Variable Costing: Sales (32000 Units x $140) $ Less: Cost of Goods Sold (32000x$90) Gross Contribution Margin Less: Variable Selling and Administration Cost (32000x$10) Contribution Margin Less: Fixed Costs: Fixed Manufacturing Overheads Fixed Selling and Administrative Costs Net Operating Income A (320,000.00) 1,280,000.00 A (480,000.00) (100,000.00) 700,000.00