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PR 20-1A Absorption and variable costing income statements During the first month of operations ended May 31, 2012, Dorm Frid

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Answer #1
WORKING NOTES:
CALCULATION OF FIXED OVERHEAD RECOVERY RATE
Fixed Manufacturing Cost $               1,37,500
Recovery Rate = $ 137,500 / 12,500 $                       11.0
Fixed Assets recovered = 11,700 Units X $ 11 = $               1,28,700
Ending inventory = 800 Units X $ 11 = $                     8,800
SOLUTION : ABSORPTION COSTING INCOME STATEMENTS
PARTICULARS AMOUNT AMOUNT
Sales $                 21,06,000
Manufacturing Cost
Direct Material $            10,50,000
Direct Labor $               3,12,500
Variable Manufacturing cost $               2,68,750
Fixed Manufacturing cost (Recovered ) $               1,28,700
$                 17,59,950
Gross Profit $                    3,46,050
Selling and administrative Expenses
Variable $                    1,69,650
Fixed $                       76,050
Net Income $                    1,00,350
VARIABLE COSTING INCOME STATEMENTS
PARTICULARS AMOUNT AMOUNT
Sales $                 21,06,000
Manufacturing Cost
Direct Material $            10,50,000
Direct Labor $               3,12,500
Variable Manufacturing cost $               2,68,750
$                 16,31,250
Variable of Selling and administrative exps. $                    1,69,650
Gross Profit $                    3,05,100
Fixed Expenses:
Fixed Maufacturing Cost $                    1,37,500
Selling Fixed Cost $                       76,050
Net Income $                       91,550
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