Question

Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 5,600 rackets and sold 4,500. Each racket was sold at a price of $86. Fixed overhead costs are $70,560, and fixed selling and administrative costs are $64,800. The company also reports the following per unit costs for the year:

Variable production costs	$	24.60
Variable selling and administrative expenses	$	1.60

Required:
Prepare an income statement under variable costing.

ACES INC Variable Costing Income Statement Sales $ 387,000 Less: Variable costs Variable production costs Variable selling and administrative expenses Variable overhead costs $110,700 7,200 117,900 Contribution margin Fixed overhead costs $70,560 64,800 Fixed selling and administrative costs Total fixed expense Net income (loss) 135,360

Answer 1

ACES INC
Variable Costing Income Statement
Sales( 4500 units*$ 86/unit)		$ 3,87,000
Less: Variable Cost of Goods Sold
Opening Inventory	$ 0
Add : Variable Cost of Goods Manufactured (5600 units* $24.60/unit)	$ 137760
Variable Cost of Goods Available for Sale	$ 137760
Less:Closing Inventory(1100 units*$24.60)	($27060)	$ 1,10,700
Gross Contribution Margin		$ 2,76,300
Less: Variable Selling and Administrative Expenses ( 4500 units*$ 1.60/unit)		($ 7,200)
Contribution Margin		$ 2,69,100
Less:Fixed Manufacturing Overhead	$ 70560
Fixed Selling and Administrative Costs	$ 64800	($135360)
Net Operating Income		$ 1,33,740

Working Note:

Calculation of unit product cost

Particulars	Variable Cost per unit
Variable Production Costs	$ 24.60
Variable Selling &Administrative Exp	$ 1.60
Total Variable cost per unit	$ 26.2