Question

O'Shea's Products manufactures a single product. Cost, sales, and production information for the company and its single product is as follows: (Click the icon to view the data.) Read the requirements Requirement 1. Prepare an income statement for the upcoming year using variable costing O'Shea's Products Contribution Margin Income Statement (Variable Costing) For the Year Ended December 31 Sales revenue Less: Variable cost of goods sold Variable operating expenses Contribution margin

Answer 1

WORKING NOTES : 1
	beginning Inventory	-	Units
	Unit Produced =	13,000	Units
	Unit Sold =	13,000	Units
	Closing Stock	-	Units
	Selling Price Per unit	$                          59.00	Per Units
	Sales Value	$                    7,67,000
	Variable Operating Expenses P.U	$                            1.00	Per Units
	Fixed Operating expenses	$                 92,000.00
	Fixed Overhead recovery Rate =
	Fixed Manufacturing expenses	$                    1,82,000
	Divide by	"/" By
	Number of units Produced	$                       13,000
	Fixed Overhead recovery Rate =	$                          14.00	Per Units
WORKING NOTES : 2
	CALCUALTION OF cost of production units by using absorption and variable Costing
	Particulars	Absorption Costing Amount	Variable Costing Amount
	Vairable Manufacturing Cost	$                          31.00	$                          31.00
	Fixed Manufacturing Overhead	$                          14.00	$                                 -
	Cost of Production per unit	$                          45.00	$                          31.00
SOLUTION = A)
	ABOSRPTION COSTING INCOME STATEMENTS	Absorption Costing
	Particulars	Amount
	Sales	$                    7,67,000
	Cost of Goods Sold
	Cost of Goods Manufactured (13,000 Units X $ 45 Per unit)	$                    5,85,000
	Cost of Goods Sold	$                    1,82,000
	Gross Profit	$                    5,85,000
	Less : Selling Expenses
	Fixed general and administrative expenses	$                       92,000
	Variable Selling Expenses	$                       13,000
	Net Income	$                    4,80,000
SOLUTION = B)
	VARIABLE COSTING INCOME STATEMENTS	Variable Costing
	Particulars	Amount
	Sales	$                    7,67,000
	Cost of Goods Sold
	Cost of Goods Manufactured (13,000 Units X $ 31 Per unit)	$                    4,03,000
	Variable Selling Expenses	$                       13,000
	Gross Profit	$                    3,51,000
	Less: Fixed Manufacturing overhead	$                    1,82,000
	Less : Fixed Operating Expenses	$                       92,000
	Net Income	$                       77,000