Question

! Required information Exercise 19-7 Income reporting under absorption costing and variable costing LO P2 The following information applies to the questions displayed below.) Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. 330 per unit 100,000 units 103,250 units 3,250 units $ 422,500 260,000 $ 682,500 Sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs Variable (3,250 units x $130) Fixed (3,250 units x $80) Total Manufacturing costs this year Direct materials Direct labor Overhead costs this year Variable overhead Fixed overhead Selling and administrative costs this year Variable Fixed $ 44 per unit 70 per unit $ $3,200,000 $7,000,000 $1,400,000 4,600,000 Exercise 19.7 Part 2

Answer 1

OAK MART COMPANY Absorption costing income statement sales & 34,072,500 Less: cost of goods sold Beginning inventory Manufacturing costs this year! Direct Materials & 682,500 Direct labor Variable overhead costs & 4, 400,000 $ 7,000,000 $ 3,200,000 $ 3,000,000 $ fixed overhead costs Ending inventory Less: $ 22,282,500 $ 11, 790,000 Cast of goods sold Gross margin Selling general & administrative expenses fixed selling of administrative costs $ 4,600,000 Variable selling & Administrative expenses $ 1,400,000 Total fixed expenses Net income (loss) 6,000,000 & 5,790,000 under absorption costing by: $ 269,000 3,250 Net income under variable costing is higher than net income alumber of units added to (subtracted from) inventory fixed overhead cost per unit fixed costs added to (subtracted from inven- tory 80 $ 260,000

Calculation" Sales Units sold x sales price per unit 103, 250 units X $330 per unit & 34,072,500 Direct materials Direct materials cost per unit x Onits unit x Onits produced unit x 100,000 units & 4,400,000 Direct labor Direct labor cost per unit x units produced & To per unit X 100,000 units $ 7,000,000 $ uuper