Question

12-17 JV Company begins its operations....

unit sold were $11.75 each, and the fixed manuractu Midway incurred fixed selling costs, primarily for advertising and sales ma of $250,000. A commission of 10% on sales is paid to sales persons, and di costs averaging $2.00 per unit were incurred. 200,000, stribution Required: Prepare, in good form, a variable costing income statement for Midway for the 20x1 12-17 Absorption Costing, Variable Costing and Throughput Costing JV Company began its operations on January 1, 20X1, and produces a single product at sells for $7.00 per unit. Standard capacity is 100,000 units per year. 100,000 units were produced and 80,000 units were sold in 20xi Manufacturing costs and selling and administrative expenses were as follows th Fixed Costs Variable Costs Raw materials Direct labor Factory overhead Selling and administrative. 80,000 There were no v overhead is written off directly at year-en $1.50 per unit produced 1.00 per unit produced .50 per unit produced .50 per unit sold $150,000 ariances from the standard variable costs. Any under- or overapplied d as an adjustment to cost of goods sold. Required Compute net income under absorption costing Compute net income under variable costing Compute net income under throughput costing.

Answer 1

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Income Statement (Absorption Costing)
Sales	80,000 Units * $ 7		$ 560,000
Less: Cost of Goods Sold
Opening Inventory		$                 -
Add: Cost of Goods Manufactured	Working-1	$       450,000
Cost of Goods Available for Sale		$       450,000
Less: Closing Inventory	20000 Units*$4.5	$        -90,000	$-360,000
Gross Profit			$ 200,000
Less: Selling and Administrative Expense
Variable	0.50*80000	$         40,000
Fixed		$         80,000	$-120,000
Net Operating Income			$    80,000
Working-1
Cost of Goods Manufactured:
Raw Material	1.50*100000	$       150,000
Direct Labor	1.00*100000	$       100,000
Variable Factory Overhead	0.50*100000	$         50,000
Fixed Factory Overhead		$       150,000
Cost of Goods Manufactured		$       450,000
No of Units Produced		100000 Units
Cost of Goods Manufactured per unit	450000/100000	$             4.50
Income Statement (Variable Costing)
Sales	80,000 Units * $ 7		$ 560,000
Less: Variable Cost of Goods Sold
Opening Inventory		$                 -
Add: Variable Cost of Goods Manufactured	100000*(1.50+1+0.5)	$       300,000
Variable Cost of Goods Available for Sale		$       300,000
Less: Closing Inventory	20000*(1.50+1+0.5)	$        -60,000	$-240,000
Gross Contribution Margin			$ 320,000
Less: Variable Selling and Administrative Expense	80000*0.5		$ -40,000
Contribution Margin			$ 280,000
Less: Fixed Expense
Fixed Factory Overhead		$       150,000
Fixed Selling and Administrative Expense		$         80,000	$-230,000
Net Operating Income			$    50,000
Income Statement (Throughput Costing)
Sales	80,000 Units * $ 7		$ 560,000
Less: Cost of Goods Sold
Opening Inventory		$                 -
Add: Cost of Goods Manufactured	100000 Units*$1.5	$       150,000
Cost of Goods Available for Sale		$       150,000
Less: Closing Inventory	20000 Units*$1.5	$        -30,000	$-120,000
Throughput Contribution			$ 440,000
Less: Other Cost
Direct Labor	100000 Units*$1	$       100,000
Variable Factory Overhead	100000 Units*$0.5	$         50,000
Fixed Factory Overhead		$       150,000
Variable Selling and Administrative Expense	80000 Units*$0.5	$         40,000
Fixed Selling and Administrative Expense		$         80,000	$-420,000
Net Operating Income			$    20,000