Question

The variable costing income statement for Jackson Company for last year is as follows:

Sales (5,000 units)		P 100,000
Variable expenses:
Cost of goods sold	P30,000
Selling (10% of sales)	10,000	(40,000)
Contribution margin		P60,000
Fixed expenses
Manufacturing overhead	P24,000
Administrative	14,400	(38,400)
Operating income		P21,600

Selected data for last year concerning the operations of the company are as follows:

Beginning inventory - 0 unit
Units produced - 8,000 units

Manufacturing costs:
Direct labor - P3.00 per unit
Direct materials - P1.60 per unit
Variable overhead - P1.40 per unit

Prepare an absorption costing income statement for last year. (Hint: Operating income under absorption costing is higher.)

Answer 1

ANSWER

ABSORPTION COSTING-INCOME STATEMENT
Sales			100,000
Less: Cost of Goods sold	45000
Gross Profit		55,000
Lless: Operating expense
Selling expense		10000
Admin expennse		14400
Operating income		30,600
Note: Unit cost under Absorption costing:
material per unit			3
Labour per unit			1.6
Variable OH per r unit		1.4
Fixed manufacturing OH (24000/8000)	3
UNIT PRODUCT COST		9
Cost of goods sold (5000 units @9)	45000

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