Question

Required information [The following information applies to the questions displayed below) Cool Sky reports the following costing data on its product for its first year of operations. During this first year, the company produced 46,000 units and sold 38,000 units at a price of $110 per unit Manufacturing costs Direct materials per unit $ 42 Direct labor per unit $ 16 Variable overhead per unit $ 5 Fixed overhead for the year $414,000 Selling and administrative costs Variable selling and administrative cost per unit $ 10 Fixed selling and administrative cost per year $115,000 2b. Assume the company uses variable costing. Prepare its income statement for the year under variable costing. 4,180,000 COOL SKY Variable Costing Income Statement Sales Less: Variable costs Variable product costs Variable selling and administrative expenses Variable overhead costs Contribution margin Plus: Fixed expenses Fixed overhead costs Fixed selling and administrative costs Fixed overhead costs Net Income (loss)

Answer 1

Solution

COOL SKY
Variable Costing Income Statement
Sales		$      4,180,000
Less: Variable costs
Direct material	$      1,596,000
Direct labor	$         608,000
Variable manufacturing overhead	$         190,000
Variable selling and administrative expenses	$         380,000	$         2,774,000
Contribution margin		$      1,406,000
Fixed costs:
Fixed manufacturing Costs	$         414,000
Fixed selling and administrative expenses	$         115,000
Total fixed costs		$         529,000
Income from operations		$         877,000