1) |
a) | Variable Costing | ||||
Particulars | Year 1 | Year 2 | |||
Direct Materials | $ 29.00 | $ 29.00 | |||
Direct Labor | $ 15.00 | $ 15.00 | |||
Variable Manu. OH | $ 6.00 | $ 6.00 | |||
$ 50.00 | $ 50.00 |
b) | Income Statement | ||||||
Particulars | Year 1 | Workings | Year 2 | Wokrings | |||
Sales | $ 2,360,000.00 | (40000 x $ 59) | $ 2,950,000.00 | (50000 x $ 59) | |||
Less: | Variable Expenses | ||||||
Direct Materials | $ 1,160,000.00 | $ 1,450,000.00 | |||||
Direct Labor | $ 600,000.00 | $ 750,000.00 | |||||
Variable Manu. OH | $ 240,000.00 | $ 300,000.00 | |||||
Variable S&A expenses | $ 200,000.00 | $ 250,000.00 | |||||
Total Variable Expenses | $ 2,200,000.00 | $ 2,750,000.00 | |||||
Contribution Margin | $ 160,000.00 | $ 200,000.00 | |||||
Less: | Fixed Expenses | ||||||
Fixed S&A expenses | $ 80,000.00 | $ 80,000.00 | |||||
Fixed Manu. OH | $ 240,000.00 | $ 240,000.00 | |||||
Total Fixed Expense | $ 320,000.00 | $ 320,000.00 | |||||
Net Operating Income | $ (160,000.00) | $ (120,000.00) |
2) |
a) | Absorption costing | |||||||
Particulars | Year 1 | Workings | Year 2 | Workings | ||||
Direct Materials | $ 29.00 | $ 29.00 | ||||||
Direct Labor | $ 15.00 | $ 15.00 | ||||||
Variable Manu. OH | $ 6.00 | $ 6.00 | ||||||
Fixed Manu. OH | $ 4.80 | ($ 240000 / 50000) | $ 6.00 | ($ 240000 / 40000) | ||||
$ 54.80 | $ 56.00 |
b) | Income Statement | |||||||
Particulars | Year 1 | Workings | Year 2 | Wokrings | ||||
Sales | $ 2,360,000.00 | (40000 x $ 59) | $ 2,950,000.00 | (50000 x $ 59) | ||||
Less: | Cost of Goods sold | $ 2,192,000.00 | (40000 x $ 54.8) | $ 2,788,000.00 | [(10000 x $ 54.8) + (40000 x $ 56)] | |||
Gross Margin | $ 168,000.00 | $ 162,000.00 | ||||||
Less: | Selling and Adm. Expenses | |||||||
Variable S&A expenses | $ 200,000.00 | (40000 x $ 5) | $ 250,000.00 | (50000 x $ 5) | ||||
Fixed S&A expenses | $ 80,000.00 | $ 80,000.00 | ||||||
Total S&A expenses | $ 280,000.00 | $ 330,000.00 | ||||||
Net operating income | $ (112,000.00) | $ (168,000.00) |
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