Question

Joplin Industries Inc. manufactures and sells high-quality sporting goods equipment under its highly recognizable J-Sports logo. The company began operations on May 1 and operated at 100% of capacity (88,000 units) during the first month, creating an ending inventory of 6,000 units. During June, the company produced 80,200 garments during the month but sold 86,200 units at $92 per unit. The June manufacturing costs and selling and administrative expenses were as follows:

Answer 1

a

Absorption Costing Income Statement
Sales 86200*$92		$          79,30,400.00
Cost of goods sold:
Beginning inventory (6000*(60))	$    3,60,000.00
Cost of goods manufactured( 80200*62)	$ 49,72,400.00
Cost of goods sold		$          53,32,400.00
Gross profit		$          25,98,000.00
Selling and administrative expenses		$          24,13,600.00
Income from operations	.	$             1,84,400.00

b

Variable Costing Income Statement
Sales		$          79,30,400.00
Variable cost of goods sold 86200*52		$          44,82,400.00
Manufacturing margin		$          34,48,000.00
Variable selling and administrative expenses		$          20,68,800.00
Contribution margin		$          13,79,200.00
Fixed costs:
Fixed manufacturing costs	$    8,02,000.00
Fixed selling and administrative expenses	$    3,44,800.00	$          11,46,800.00
Income from operations		$             2,32,400.00

c

Under variable costing,all of the fixed manufacturing cost is deducted in the period in which it is incurred,regardless of the amount of inventory change.