Question

i need help

The avua data Tattoos pertain to Rice Radiol yw, a manufacture of wring goes the company had to beginning inventory (Cick the conteve the data) Requirements 1. Prepare both conventional absorption conting and contribution margin (variabile conting income one for adical Eyewear for the year 2. Wich statement shows the hearing income? Why? 2. The company making word besar sales promotion that cows $150.000 would increases to 220,000 googles should the company go ahead with the promotion your reason Requirement 1. Prepare both converteral (atsorption control and coverbustion margin (variabile conting) ncome statement for rek's Resort yanar torse your Bagan win the conversion (starten castingi ncome statement Rick's Radical Eyewear Income Statement Absorption Costing For the Year Ended December 31 Data Tatie Sales reven Lost Cost of goods sold Sales Lost Opening expenses Vwwe mandringene per pro 5 18 Fad minuturing Number of produced Number of Print Choose from any istory number in the input fields and then click Check Awet 5 parts semang CA Check A

Answer 1

Requirement 1:

Rick's Radical Eyewear

Income Statement (Absorption Costing)

For the year Ended December 31

Particulars	$
Sales Revenue (206,000 units * $39)	8,034,000
Less: Cost of goods sold (206,000 Units * $27)	5,562,000
Gross Profit	2,472,000
Less: Operating Expenses (206,000 units * $9) + $240,000	2,094,000
Operating Income	378,000

Working Notes:

Unit Product Cost

Particulars	$
Variable manufacturing expense per unit	18
Fixed manufacturing overhead per unit ($1,980,000 / 220,000)	9
Total Unit product cost	27

Rick's Radical Eyewear

Contribution Margin (Variable costing) Income Statement

For the year Ended December 31

Particulars	$
Sales Revenue (206,000 Units * $39)	8,034,000
Less: Variable expenses
Variable cost of goods sold (206,000 Units * $18)	3,708,000
Variable operating expenses (206,000 Units * $9)	1,854,000
Contribution Margin	2,472,000
Less: Fixed expenses
Fixed manufacturing overhead	1,980,000
Fixed Operating expenses	240,000
Operating Income	252,000

Requirement 2:

Absorption costing operating income is higher than the variable costing operating income. This is because absorption costing defers $126,000 (14,000 Units * $9) of fixed manufacturing overhead as an asset in ending inventory. In contrast, variable costing expenses all the of the fixed manufacturing overhead during the year.

Variable costing expenses costs $126,000 more costs during the year, so variable costing operating income is $126,000 less than the absorption costing income the year.

Requirement 3:

Increase in Contribution margin (220,000 - 206,000) * $12	$168,000
Increase in fixed expenses	($150,000)
Increase in operating Income	$18,000

Contribution margin per unit = $39 - $18 - $9 = $12

Rick's Radical Eyewear should go ahead with the promotion because the increase in contribution margin exceeds the increase in fixed cost.

All the best...