Question

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. $ 320 per unit 115,000 units 118,750 units 3,750 units $ 487,500 281,250 $ 768,750 Sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs Variable (3,750 units * $130) Fixed (3,750 units X $75) 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 ta ta 44 per unit 66 per unit $3,400,000 $7,400,000 $1,450,000 4,600,000

Prepare the current-year income statement for the company using absorption costing.

Answer 1

solution:

Oak Mart Company
Absorption Costing - Income Statement
Sale Revenue (118750*$320)		$3,80,00,000
Beginning Inventory
Variable	$4,87,500
Fixed	$2,81,250
Manufacturing Cost this year
Direct Material	$50,60,000
Direct Labor	$75,90,000
variable Overhead	$34,00,000
Fixed Overhead	$74,00,000
Total Cost of goods sold		$2,42,18,750
Gross Profit		$1,37,81,250
Selling and administrative cost:
Variable	$14,50,000
Fixed	$46,00,000
Total Selling administrative cost		$60,50,000
Net Operating Income		$77,31,250
Net Income under absorption costing is less than Net income under Variable costing by ($8012500-$7731250)		-$2,81,250
Number of units added to (substructed from) Inventory		-3750
Fixed Overhead cost per unit		$75
Fixed costs added to Inventory (3750*$75)		-$2,81,250

Working:

Oak Mart Company
Variable Costing - Income Statement
Sale Revenue (118750*$320)		$3,80,00,000
Beginning Inventory
Variable	$4,87,500
Manufacturing Cost this year
Direct Material (115000*$44)	$50,60,000
Direct Labor (115000*$66)	$75,90,000
variable Overhead	$34,00,000
Selling and administrative cost:
Variable	$14,50,000
Total Variable cost		$1,79,87,500
Contribution margin		$2,00,12,500
Less: Fixed costs
Fixed Overhead	$74,00,000
Fixed Selling & Administrative Expenses	$46,00,000
Total Fixed Costs		$1,20,00,000
Net Income (Loss)		$80,12,500