Question

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. Sales price per unit $ 320 per unit Units produced this year 115,000 units Units sold this year 118,750 units Units in beginning-year inventory 3,750 units Beginning inventory costs Variable (3,750 units × $135) $ 506,250 Fixed (3,750 units × $75) 281,250 Total $ 787,500 Manufacturing costs this year Direct materials $ 50 per unit Direct labor $ 70 per unit Overhead costs this year Variable overhead $ 3,000,000 Fixed overhead $ 7,000,000 Selling and administrative costs this year Variable $ 1,500,000 Fixed 4,400,000 Exercise 19-7 Part 1 1. Prepare the current-year income statement for the company using variable costing.

Answer 1

Prepare the current year income statement for the company using variable costing.

OAK MART COMPANY Variable Costing Income Statement Sales ($320 * 118750 units) $38000000 Less: Variable costs Beginning inventory: Variable costs $506250 Manufacturing cost this year Direct materials ($50 * 115000 units) $5750000 Direct labor ($70 * 115000 units) $8050000 Variable overhead costs $3000000 Total variable costs available $17306250 Less: Ending finished goods inventory 0 Variable cost of goods sold $17306250 Variable selling and administrative expenses $1500000 Total variable costs $18806250 Contribution margin $19193750 Less: Fixed expenses Fixed selling and administrative costs $4400000 Fixed overhead costs $7000000 Total fixed expenses $11400000 Net income (loss) $7793750