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Z Inc. manufactures a product with a selling price of $60 per unit. Direct Materials costs...

Z Inc. manufactures a product with a selling price of $60 per unit. Direct Materials costs $12 per unit. Direct Labor costs $11 per unit. Variable Manufacturing Overhead costs $6 per unit. Fixed Manufacturing Overhead costs $34,000 per month. Variable Selling and Administrative Costs $5 per unit. Fixed Selling and Administrative costs $17,000.

a) Complete the month’s Contribution Margin Income Statement Budget for Z Inc., assuming that they plan to sell 10,000 units of product.

TOTAL

SALES

VARIABLE COST

CONTRIBUTION MARGIN

FIXED COST

OPERATING INCOME

b) Complete the month’s Financial Statement Income Statement Budget for Z Inc., assuming that they plan to sell 11,000 units of product.

TOTAL

SALES

COST OF GOODS SOLD

GROSS MARGIN

SELLING AND ADMINISTRATING COSTS

OPERATING INCOME
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Answer #1

a) contribution margin INCOME STATEMENT

Particular $
SALES 60*10000 600000
VARIABLE COST 34*10000 340000
CONTRIBUTION MARGIN 260000
FIXED COST 34000+17000 51000
OPERATING INCOME 209000

b.

Financial income statement

Particular $
SALES 60*11000 660000
COST OF GOODS SOLD 29*11000+34000 353000
GROSS MARGIN 307000
SELLING AND ADMINISTRATING COSTS 17000+5*11000 72000
OPERATING INCOME 235000

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