Question

19.4

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,050 kayaks and sold 800 at a price of $1,050 each. At this first year-end, the company reported the following income statement information using absorption costing. Sales (800 x $1,050) Cost of goods sold (800 x $500) Gross margin Selling and administrative expenses Net income $840,000 400,000 440,000 230,000 $210,000 Additional Information a. Product cost per kayak totals $500, which consists of $400 in variable production cost and $100 in fixed production cost- the latter amount is based on $105,000 of fixed production costs allocated to the 1,050 kayaks produced. b. The $230,000 in selling and administrative expenses consists of $75,000 that is variable and $155,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing. 2. Fill in the blanks: The dollar difference in variable costing income and absorption costing income = fixed overhead per unit. units x Page 76

Answer 1

	Income Statement
	(variable costing)
	for the year ended December 31,2015
sales						840,000
Variable expense
Variable production costs			(800*400)		320000
Variable selling and administrative costs					75,000
total variable expense						395,000
Contribution margin						445,000
Fixed expense
Fixed overhead					105,000
Fixed selling and administrative cost					155,000
total fixed expenses						260,000
Net income						185,000
the dollar difference in variable costing income and absorption costing income = 250 units *100 fixed overhead
per unit