Question

Donald Company prepared the following full-absorption-costing income statement for the year ended May 31, 2013: Sales (16,000 units) $320,000 Cost of goods sold 216,000 Gross margin $104,000 Selling and administrative expenses 46,000 Operating income $58,000 Additional information follows: 17,500 units are produced. Selling and administrative expenses include $1.50 of variable cost per unit sold. Variable manufacturing costs were $11 per unit. Required: Prepare a variable-costing income statement for the same period.

Answer 1

Fixed Manufacturingoverhead cost per Unit :

Cost of Goods sold Per unit = 216,000/16,000 = $ 13.50

Fixed MOH per unit = Cost of Good sold Per unit - Variable Manufacturing Cost per Unit

=13.50- $ 11.00 = 2.50

Total Fixed MOH = 17500*2.50 = 43750

320000 11 1.5 Variable Costing Income Statement Sales Revenue Variable Expense Variable Manufacturing Cost Variable Selling and Administrative Expense Total Variable Expenses Contribution Margin Fixed Expenses Fixed Manufacturing Overheads Fixed Selling and Administrative Expenses Total fixed Expenses Net Operating Income 176000 = 16000 * 24000/= 16000 * 200000 120000 43750 22000 46000 - 24000 65750 54250 Answer