Question

19.7

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. $320 per unit 115,000 units 118,000 units 3,000 units $405,000 240,000 $645,000 Sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs Variable (3,000 units x $135) Fixed (3,000 units x $80) 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 $40 per unit $62 per unit $3,220,000 $7,400,000 $1,416,000 $4,600,000

Answer 1

Solution 1:

Oak Mart Company
Variable Costing - Income Statement
Sale Revenue (118000*$320)		$3,77,60,000
Beginning Inventory
Variable	$4,05,000
Manufacturing Cost this year
Direct Material (115000*$40)	$46,00,000
Direct Labor (115000*$68)	$71,30,000
variable Overhead	$32,20,000
Selling and administrative cost:
Variable	$14,16,000
Total Variable cost		$1,67,71,000
Contribution margin		$2,09,89,000
Less: Fixed costs
Fixed Overhead	$74,00,000
Fixed Selling & Administrative Expenses	$46,00,000
Total Fixed Costs		$1,20,00,000
Net Income (Loss)		$89,89,000

Solution 2:

Oak Mart Company
Absorption Costing - Income Statement
Sale Revenue (118000*$320)		$3,77,60,000
Beginning Inventory
Variable	$4,05,000
Fixed	$2,40,000
Manufacturing Cost this year
Direct Material	$46,00,000
Direct Labor	$71,30,000
variable Overhead	$32,20,000
Fixed Overhead	$74,00,000
Total Cost of goods sold		$2,29,95,000
Gross Profit		$1,47,65,000
Selling and administrative cost:
Variable	$14,16,000
Fixed	$46,00,000
Total Selling administrative cost		$60,16,000
Net Operating Income		$87,49,000

Solution 3:

Difference = 3000 units * $80 fixed overhead per unit

= $240,000