Question

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Oak Mart, a producer of solid oak tables, reports the following data from its second year of business.

Sales price per unit	$	310	per unit
Units produced this year		120,000	units
Units sold this year		123,250	units
Units in beginning-year inventory		3,250	units
Beginning inventory costs
Variable (3,250 units × $140)	$	455,000
Fixed (3,250 units × $75)		243,750
Total	$	698,750
Manufacturing costs this year
Direct materials	$	42	per unit
Direct labor	$	62	per unit
Overhead costs this year
Variable overhead	$	3,200,000
Fixed overhead	$	7,200,000
Selling and administrative costs this year
Variable	$	1,500,000
Fixed		4,600,000

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

Answer 1

Req. 2

OAK MART COMPANY
Absorption Costing Income Statement
Sales ( 123,250 ×$ 310)		$ 38,207,500
Less: Cost of Good Sold
Beginning Inventory	$698,750
Manufacturing costs this year:
Direct Material ($42× 123,250)	5,176,500
Direct Labor ( $ 62 × 123,250)	7,641,500
Variable Overhead Cost	3,200,000
Fixed Overhead Cost	7,200,000
Less: Ending inventory	0
Cost of Good Sold		(23,916,750)
Gross Margin		$14,290,750
Selling general and administrative expenses:
Fixed selling and administrative costs	4,600,000
Variable selling and administrative expenses	1,500,000
Total selling & Admin Expense		(6,100,000)
Net Income/( Loss)		$ 8,190,750