Question

Rey Company's singie product sells at a price of $227 per unit Data for its single product for its first year of operations follow. се о Direct materials Direct labor Overhead costs 31 per unit $39 per unit Variable overhead Fixed overhead per year S13 per unit $420,000 per year Selling and administrative expenses Variable Fixed $29 per unit $222,000 per year 28,000 units Units produced and sold 1. Prepare an income statement for the year using absorption costing 2 Prepare an income statement for the year using variabie costing

Answer 1

Construct The Absorption Costing Unit Product Cost
Direct Material				31
Direct labour				39
Variable Manufacturing overheads				13
Fixed Manufacturing overheads				15.00	(420000/28000)
Absorption costing unit prroduct cost				98.00
Construct the Absorption Costing Income Statement
				Year 1
Sales				$6,356,000
Cost of Goods sold				2744000
Gross Margin				$3,612,000
Selling and distribution expense				1,034,000
Net operating income				2,578,000
Compute the Variable costing Unit Product cost
Direct Material				31
Direct labour				39
Variable Manufacturing overheads				13
Variable costing unit prroduct cost				83
Construct The Variable Costing Income Statement
				YEAR 1
Sales					6,356,000
Less: Variable cost
variable cost of goods sold				2,324,000
Variable selling expense				812,000	3,136,000
Contribution margin					3,220,000
Fixed expense:
Fixed Manufacturing overheads					420,000
Fixed selling expense					222,000
Net operating Income					2,578,000