Question

The following information pertains to the first year of operation for Crystal Cold Coolers Inc.: 3,000 2.500 350 S Number of units produced Number of units sold Unit sales price Direct materials per unit Direct labor per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit ($225,000 + 3,000 units) Total variable selling expenses ($15 per unit sold) Total fixed general and administrative expenses 60 37,500 65,000 Required: Prepare Crystal Cold's full absorption costing income statement and variable costing income statement for the year. (Do not leave any numeric cells blank, enter a zero wherever required.) CRYSTAL COLD COOLERS INC. Full Absorption Costing Income Statement Less: Cost of Goods Sold Cost of Goods Available for Sale Cost of Goods Sold Gross Margin Less: Non-Manufacturing Expenses Net Operating Income
The options it allows you to pick are Beginning Inventory, Contribution Margin, Cost of Goods Manufactured, Ending inventory, Fixed General and Administrative expense, Interest expense, Sales, and Variable selling expense.

Answer 1

Ans. 1	CRYSTAL COLD COOLERS, INC.
	Full Absorption Costing
	Income Statement
	PARTICULARS		Amount
	Sales		$875,000
	Less: Cost of goods sold
	Beginning inventory	$0
	Add: Cost of goods manufactured	$675,000
	Cost of goods manufactured	$675,000
	Ending inventory	($112,500)
	Cost of goods sold		$562,500
	Gross margin		$312,500
	Less: Non manufacturing expenses:
	Fixed general and Administrative expense	$65,000
	Variable selling expense	$37,500
	Expenses		$102,500
	Net operating income		$210,000
	*WORKING NOTES:
	*Sales =   2,500 * $350 = $875,000
	*Cost of goods manufactured = (3,000 * $225) = $675,000
	*Ending inventory   = (Units produced - Units sold) * Production cost per unit
	[(3,000 - 2,500) * $225 = $112,500
	*Gross margin = ($875,000 - $562,500) = $312,500
	*Calculations of Product cost per unit under Absorption costing:
	In Absorption costing method, the unit product cost is the sum of all manufacturing costs per unit
	whether it is fixed or variable.
	Unit product cost under Absorption Costing:
	Direct materials	$80.00
	Direct labor	$60.00
	Variable Overhead per unit	$10.00
	Fixed overhead per unit	$75.00
	Product Cost per unit	$225.00
Ans. 2	CRYSTAL COLD COOLERS, INC.
	Variable Costing
	Income Statement
	PARTICULARS		Amount
	Sales		$875,000
	Less: Variable cost of goods sold
	Beginning inventory	$0
	Variable manufacturing costs	$450,000
	Cost of goods available for sale	$450,000
	Ending inventory	($75,000)
	Variable cost of goods sold		$375,000
	Variable selling expense		$37,500
	Contribution Margin		$462,500
	Less: Fixed costs:
	Fixed manufacturing overhead	$225,000
	Fixed general and Administrative expense	$65,000	$290,000
	Net operating income		$172,500
	*WORKING NOTES:
	*Variable manufacturing costs    (3,000 * $150) =   $450,000
	*Ending inventory   = (Units produced - Units sold) * Production cost per unit
	[(3,000 - 2,500) * $150] = $75,000
	*Contribution margin = Sales - Variable cost of goods sold - Variable selling expense
	$875,000 - $375,000 - $37,500
	*Calculations of Product cost per unit under Variable costing:
	In variable costing method, the unit product cost is the sum of only variable
	manufacturing costs per unit
	Unit product cost under Variable Costing:
	Direct materials	$80.00
	Direct labor	$60.00
	Variable Overhead per unit	$10.00
	Total production cost per unit	$150.00