Question

During the most recent year, Osterman Company had the following data: Units in beginning inventory ---

Units produced 10,250
Units sold ($49 per unit) 9,050
Variable costs per unit:
Direct materials $8
Direct labor $5
Variable overhead $3
Fixed costs:
Fixed overhead per unit produced $5
Fixed selling and administrative $138,000
Required:
1. Calculate the cost of goods sold under absorption costing.
2. Prepare an income statement using absorption costing.

Answer 1

1.

Schedule of cost of goods sold

Direct material (9,050 x 8)	72,400
Direct labor (9,050 x 5)	42,250
variable manufacturing overhead (9,050 x 3)	27,150
Fixed manufacturing overhead (9,050 x 5)	42,250
Cost of goods sold	$184,050

2.

Income statement

sales (9,050 x 49)	443,450
Cost of goods sold	-184,050
Gross profit	259,400
Fixed selling and administrative expense	-138,000
Net income	$121,400