Question

During the most recent year, Osterman Company had the following data:

Units in beginning inventory	---
Units produced	11,350
Units sold ($50 per unit)	9,400
Variable costs per unit:
Direct materials	$10
Direct labor	$5
Variable overhead	$3
Fixed costs:
Fixed overhead per unit produced	$4
Fixed selling and administrative expenses	$138,500

Labels
Add: Fixed expenses
Less: Fixed expenses
Amount Descriptions
Contribution margin
Cost of goods sold
Fixed overhead
Fixed selling and administrative expenses
Gross margin
Operating income
Operating loss
Sales
Variable costs

1. Calculate the cost of goods sold under variable costing.

The cost of goods sold under the variable costing method is .

2. Prepare an income statement using variable costing. Refer to the list of Labels and Amount Descriptions for the exact wording of text items within your income statement.

Osterman Company

Variable-Costing Income Statement

For the Most Recent Year

1
2
3
4
5
6
7

Amount Descriptions
Contribution margin
Cost of goods sold
Gross margin
Operating income
Operating loss
Sales
Selling and administrative expenses

1. Calculate the cost of goods sold under absorption costing.

The cost of goods sold under the absorption costing method is .

2. Prepare an income statement using absorption costing. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Osterman Company

Absorption-Costing Income Statement

For the Most Recent Year

1
2
3
4
5

Answer 1

Computation of Cost of Goods Sold for 9400 Unit
	Using Variable costing			Using Absorption costing
	Cost/unit	toal Cost		Cost/unit	toal Cost
Variable cost for 9400 unit
Direct Material	$10	$94,000		$10	$94,000
Direct labour	$5	$47,000		$5	$47,000
Variable Overhead	$3	$28,200		$3	$28,200
Fixed Cost
Fixed ovehead		-		$4	$37,600
Total cost of goods sold		$169,200			$206,800
Income statement
	Using Variable costing			Using Absorption costing
		toal Cost			Amount
Sales ( 9400 unit@$50)		470000			470000
Less: Cost of goods sold		$169,200			$206,800
Contribution marging		$300,800			$263,200
Less: Fixed Overhead		$37,600			$0
Gross Margin		$263,200			$263,200
Less: Selling & adminstration Expenses		$138,500			$138,500
Operating Income		$124,700			$124,700