Question

all 3 requiremnts

The annual data that follows pertanto Ro's Ratical Eyewear a mant Cache kostove the data) er of w ing the company had no beginning inventory) Requirements 1. Prepare both conventional spon c a nd contribution margin (varate costing income statements for R 's Radical Eyewear for the year 2. Which statement shows the per operating come? Why? 3. The comparty marketing vice presidente was promotional costs $140,000 would increase sales to 205000 google. Should the company good with the promo Give your reason Requirement 1. Prepare both o p tion costing and contribution margin variable costing income statements for Rick's Radio F o r the begin with the convention option costing income statement Rick's Radical Eyewear Income Statement Absorption Costing For the Year Ended December 31 i Data Table Sales price Variable manufacturing expense per Loss Operating en Fem overhead Faced operating expenses Number of produced Choose from any listore any number in the routes and then check Answer

Answer 1

Requirement 2:

Requirement 1 ABSRPTION COSTING Sales Revenue Less: Manufacturing Cost Manufacturing Margin Less: Operating Expenses Opearting Profit $ 94,56,000.00 $ 57,13,000.00 $ 37,43,000.00 $ 16,28,853.66 $ 21,14,146.34 VARIABLE COSTING Sales Revenue Less: Variable Manufacturing Cost Selling Commission Contribution margin Less: Fixed Cost Manufacturing Expenses Operating Expenses Operating Profit $ 94,56,000.00 $ 41,37,000.00 $ 13,79,000.00 $ 39,40,000.00 $ 16,40,000.00 $ 2,60,000.00 $ 20,40,000.00 Requirement 3 INCREMENTAL BENEFIT ANALYSIS (Variable Costing) Incremental Contribution margin from additional 8,000 units $ 1,60,000.00 Less: Incremental promotional cost $ 1,40,000.00 Incremental Benefit $ 20,000.00

Absorption Costing Shows higher profit. The reason behind higher profit is that in absorption costing, the fixed overhead have been charged to income statement on proportionate basis whereas in case of variable costing, whole of the fixed expenses are charged to the income statement resulting in lower profits.

Notes:

1. Be careful while reading figures (with commas).
2. The Incremental benefit is done on the basis of variable costing.