Question

BUSINESS SOLUTIONS Absorption Costing Income Statements Production volume 300 320 Sales volume - 300 Workstations workstations workstations Sales Cost of goods sold Gross margin Selling general and administrative expenses Net income (loss) 0 $ 0 Under absorption costing, can the difference between production volume and sales volume affect the reported net income (loss)? margin 2. Complete the following income statements using variable costing. 320 workstations 300 workstations BUSINESS SOLUTIONS Variable Costing Income Statements 300 Production volume (units) workstations Sales volume (units) 300 workstations Sales Less: Variable costs Direct materials Direct labor Variable overhead Variable selling expenses Contribution margin Less: Fixed expenses Fixed overhead costs Fixed selling expenses Fixed selling expenses Net income (loss) Under variable costing, can a company increase its net income by increasing production?

Answer 1

Solution 1:

Computation of Cost of goods sold
Particulars	Production Volume
	300 Workstations	320 Work stations
Direct material	$740.00	$740.00
Direct labor	$380.00	$380.00
Variable overhead	$70.00	$70.00
Fixed overhead	$64.00	$60.00
Cost per unit	$1,254.00	$1,250.00
Nos of units sold	300	300
Cost of goods sold	$376,200.00	$375,000.00

Business solution
Absorption costing income statement
Particulars	Production Volume
	300 Workstations	320 Work stations
Sales	$1,080,000.00	$1,080,000.00
Cost of goods sold	$376,200.00	$375,000.00
Gross Profit	$703,800.00	$705,000.00
Operating Expenses:
Variable selling expenses	$15,000.00	$15,000.00
Fixed Selling expenses	$3,200.00	$3,200.00
Total Selling Expenses	$18,200.00	$18,200.00
Net Operating Income	$685,600.00	$686,800.00
Under absorption costing, can the difference between production volume and sales volume affect the reported net income (Loss)		Yes

Solution 2:

Variable costing income statement
Particulars	Production Volume
	300 Workstations	320 Work stations
Sale Volume	300	300
Sales	$1,080,000.00	$1,080,000.00
Variable Cost:
Direct material	$222,000.00	$222,000.00
Direct labor	$114,000.00	$114,000.00
Variable overhead	$21,000.00	$21,000.00
Variable selling expenses	$15,000.00	$15,000.00
Contribution margin	$708,000.00	$708,000.00
Fixed Cost:
Fixed overhead	$19,200.00	$19,200.00
Fixed selling expenses	$3,200.00	$3,200.00
Net Operating Income	$685,600.00	$685,600.00
Under variable costing, can a company increase its net income by increasing production?	No