Question

Kenzi Kayaking, a manufacturer of kayaks, began operations this year. During this first year, the company produced 1,000 kayaks and sold 750. at a price of $1,000 each. At this first year-end, the company reported the following income statement information using absorption costing. $ Sales (750 x $1.000) Cost of goods sold (750 x $400) Gross margin Selling and administrative expenses Net income 750,000 300,000 450,000 250,000 200.000 $ Additional Information a. Product cost per kayak totals $400, which consists of $300 in variable production cost and $100 in fixed production cost--the latter amount is based on $100,000 of fixed production costs allocated to the 1000 kayaks produced b. The $250,000 in selling and administrative expense consists of $95.000 that is variable and $155,000 that is fixed. Required 1. Prepare an income statement for the current year under variable costing

Answer 1

KENZI KAYAKING Varaible Costing Income Statement 750000 225000 95000 Sales (750*1000) LESS: Variable Expense Variable Prodcut Cost (750*300)) Variable Selling and Administrative Expense Total Varible Expenses Contribution Magin LESS:Fixed Expenses Fixed manufacturing Overheads Fixed Selling and Administrative Expenses Total fixed Expenses Net income (loss) 320000 430000 100000 155000 255000 175000 Net Income Under absorption costing is higher than net income undere Varaible costing By: Number of units add to (sunstrated from) invenotry (1000-750) Fixed cost per unit Fixed costs added to inventory (250*100) 25000 250 100 25000