Question

Marin, Inc. is a company that manufactures and sells a single product. Unit sales for each of the four quarters of 2020 are projected as follows.

Quarter		Units
First		91,200
Second		171,000
Third		627,000
Fourth		136,800
Annual total		1,026,000

Marin incurs variable manufacturing costs of $0.40 per unit and variable nonmanufacturing costs of $0.40 per unit. Marin will incur fixed manufacturing costs of $820,800 and fixed nonmanufacturing costs of $1,231,200. Marin will sell its product for $4 per unit.

(a)

Determine the amount of net income Marin will report in each of the four quarters of 2020, assuming actual sales are as projected and employing the integral approach to interim financial reporting. (Ignore income taxes.) Repeat the analysis under the discrete approach. (Round answers to 0 decimal places, e.g. 5,125.)

		1st Quarter		2nd Quarter		3rd Quarter		4th Quarter
Net income (Integral Approach)		$		$		$		$
Net income (Discrete Approach)		$		$		$		$

Answer 1

Answer -

Explanation -

a)  The amount of net income of Martin, Inc. is calculated as under using integral approach financial reporting:

Note 1:

Fixed manufacturing cost is $820,800 which is allocated to each quarter on the basis of quantities sold. The total units sold in all the four quarters are 1,026,000 therefore fixed manufacturing costs will be allocated on the basis of $0.80 per unit calculated as under:

Fixed mnf cost per unit = total fixed mnf cost/ total no. of units sold

= $820,800/1,026,000

= $0.80 per unit

The fixed manufacturing cost for each quarter is calculated by multiplying the units sold during the quarter with the fixed manufacturing cost per unit of $0.80.

Note 2:

Fixed non-manufacturing cost is $1,231,200 which is allocated to each quarter on the basis of quantities sold. The total units sold in all the four quarters are 1,026,000 therefore fixed manufacturing costs will be allocated on the basis of $1.20 per unit calculated as under:

Fixed non-mnf cost per unit = total fixed non-mnf cost/ total no. of units sold

= $1,231,200/1,026,000

= $1.20 per unit

The fixed non- manufacturing cost for each quarter is calculated by multiplying the units sold during the quarter with the fixed non-manufacturing cost per unit of $1.20.

------

b) The calculation of amount of net income using discrete approach is as under:

Note 3:
Fixed manufacturing cost is $820,800 which is allocated to each quarter on the basis of quantities sold. The total units sold in all the four quarters are 1,026,000 therefore fixed manufacturing costs will be allocated on the basis of $0.80 per unit calculated as under:

Fixed mnf cost per unit = total fixed mnf cost/ total no. of units sold
= $820,800/1,026,000
= $0.80 per unit

The fixed manufacturing cost for each quarter is calculated by multiplying the units sold during the quarter with the fixed manufacturing cost per unit of $0.80.

Note 4:
Fixed non-manufacturing cost is $1,231,200 which is allocated to each quarter equally. Therefore fixed non-manufacturing costs will be calculated as under:

Fixed non-mnf cost per unit = total fixed non-mnf cost/ total no. of units sold
= $1,231,200/4
= $307,800 per quarter

------