Question

5 Rey Company's single product sells at a price of $235 per unit. Data for its single product for its first year of operations follow 714 Dots 5 5 39 per unit 47 per unit Direct materials Direct labor Overhead costs Variable overhead Fixed overhead per year Selling and administrative expenses Variable Fixed Units produced and sold 5 S per unit $ 168,000 per year eBook $ 37 per unit $ 238,000 per year 24,000 units HIE 1. Prepare an income statement for the year using absorption costing 2. Prepare an income statement for the year using variable costing. Prist Complete this question by entering your answers in the tabs below. References Required 1 Required 2 Prepare an income statement for the year using absorption costing. REY COMPANY Absorption Costing Income Statement Net Income (s) Required 2 >

Answer 1

First understand what is absorpation Costing and what is variable Costing

Under absorption all cost of production are linked whether it is a variable cost or fised cost and

under variable costing only those cost are linked which are variable in nature however fixed cost are period cost and are consier in end to arrived at the actual profit.

Income Statement under absorption costing.

Particular Sale Rate $ Unit 235 24000 Total Amount $ 5640000 Cost of Production: 39 24000 47 24000 936000 1128000 Direct Material Direct Labour Overhead cost Variable Fixed Total 5 24000 120000 168000 288000 2352000 Gross Profit 3288000 888000 Selling and Distribution Expense Variable 37] 24000 Fixed Total 238000 1126000 1126000 Net Operating Profit 2162000

Income Statement under Variable Costing.

Particular Sale A Rate $ Unit Amounts 235 24000 5640000 39 24000 936000 471 24000 1128000 Less Variable cost of Goods sold: Direct Material Direct Labour Variable overhead cost Total B Gross Contribution Margine (A-B) C 5) 24000 120000 2184000 3456000 37 24000 888000 2568000 Variable Selling and Distribution Expense D Contribution Margine (C-D) Less Period Expenses: Fixed Manufacturing Overhead Fixed Selling and Distribution Expenses Total 168000 238000 406000 406000 Net Operating Profit 2162000