Question

Exercise 06-4 Variable costing income statement LO P2 Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,050 Kayaks and sold 800 at a price of $1,050 each. Al this first year-end, the company reported the following income statement information using absorption costing Sales (800 $1,ese) Cost of goods sold (880 $425) Gross margin Selling and administrative expenses Net income $ 840, eee 340,000 509,000 220,000 $ 280,000 Additional Information .. Product cost per kayak totals $425, which consists of $325 in variable production cost and $100 in fixed production cost-the latter amount is based on $105,000 of fixed production costs allocated to the 1,050 kayaks produced b. The $220,000 in selling and administrative expense consists of $85,000 that is variable and $135,000 that is fixed. Required: 1. Prepare an income statement for the current year under variable costing

Answer 1

840000 KENZI KAYAKING Varaible Costing Income Statement Sales (800*1050) LESS: Variable Expense Variable Prodcut Cost (800*325)) 260000 Variable Selling and Administrative Expense 85000 Total Varible Expenses Contribution Magin LESS:Fixed Expenses Fixed manufacturing Overheads 105000 Fixed Selling and Administrative Expenses 135000 Total fixed Expenses Net income (loss) 345000 495000 240000 255000 Net Income Under absorption costing is higher than net income undere Varaible costing By: Number of units add to (sunstrated from invenotry (1050-800) Fixed cost per unit Fixed costs added to inventory (250*100) The Dollar Difference in Variable Costing 250 income and Absorption Costing income = 25000 250 100 25000 Units 100 Fixed Overhead Per unit