Question

In 2019, Bran Sherry Inc. sold 50,000 units at a selling price of $35 per unit. The company manufactured 60,000 units. Variable manufacturing costs were $14 per unit manufactured. Fixed manufacturing costs amounted to $300,000. Variable marketing costs were $10 per unit sold, and the budgeted and actual fixed marketing costs were $40,000. Other fixed operating expenses amounted to $20,000. There was no beginning inventory. Required a) Calculate the company's 2019 income from operations using absorption costing. urricing Chapter 6 b) Calculate the company's 2019 income from operations using variable cos

Answer 1

Income Statament Under Absorption Costing
Sales (Unit Sold * Selling Price Per Unit)		$       17,50,000
COGS:
Cost Of Produced (Unit Produced * UPC))	$       11,40,000
Less: Closing Inventory (closing inventory * UPC)	$          1,90,000
Add:Beginning Inventory	$                       -	$          9,50,000
Gross Profit		$          8,00,000
Variable Marketing cost (50000*$10)		$          5,00,000
Fixed Marketing Expenses		$             40,000
Other fixed operating expenses		$             20,000
Net Operating Income		$          2,40,000

Income Statement Under Variable Costing System
	Per Unit	Total
Sales (Unit Sold * Selling Price Per Unit)	$                35.00	$       17,50,000
Variable Costs:
Variable Manufacturing Costs (unit sold * per unit cost)	$                14.00	$          7,00,000
Variable Marketing cost	$                10.00	$          5,00,000
Total	$                  24.0	$       12,00,000
Contribution Margin	$                11.00	$          5,50,000
Fixed Costs
Fixed Manufacturing Costs		$          3,00,000
Other fixed costs		$             60,000
Net Operating Income		$          1,90,000

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