Question

4

Required Information [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. 3ee per unit 105,000 units 109,000 units 4,000 units $ 560, eee 300,000 $ 850,00 Sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs Variable (4, eee units * $140) Fixed (4,000 units * $75) Total Manufacturing costs this year Direct materials Direct labor Overhead costs this year Variable overhead Fixed overhead Selling and administrative costs this yean Variable Fixed $ de per unit 64 per unit $3,400, see, 31.450,000 2000 2. Prepare the current-year Income statement for the company using absorption costing

Answer 1

Solution:

OAK MART COMPANY
Variable costing Income statement
Sales		32700000
Less: Variable costs
Beginning inventory
Variable costs	560000
Manufacturing cost this year
Direct materials	4200000
Direct labour	6720000
Varible overhead costs	34,00,000
Total variable costs available	1,48,80,000
Less: Ending finished goods inventory	0
Varible cost of goods sold	1,48,80,000
Variable selling and administrative expenses	14,50,000
Total variable costs		1,63,30,000
Contribution margin		1,63,70,000
Less: Fixed expenses
Fixed selling and administration costs	42,00,000
Fixed overhead costs	70,00,000
Total fixed expenses		1,12,00,000
Net Income(loss)		51,70,000

OAK MART COMPANY
Absorption costing Income statement
Sales		32700000
Less: cost of goods sold
Beginning inventory	860000
Manufacturing costs this year
Direct materials	4200000
Direct labour	6720000
Variable overhead costs	34,00,000
Fixed overhead costs	70,00,000
Less: Ending inventory	0
Cost of goods sold		2,21,80,000
Gross margin		1,05,20,000
Selling general and administrative expenses
Fixed selling and administrative costs	42,00,000
Variable selling and adminsitartive expenses	14,50,000
Total fixed expenses		56,50,000
Net Income(loss)		48,70,000
Net Income under variable costing is higher than net Income under absorption costing by		3,00,000
Number of units added to (subtracted from) inventory		4,000
Fixed overhead cost per unit		75
Fixed costs added to (Subtracted from) inventory		300000