Question

Exercise 19-7 Income reporting under absorption costing and variable costing LO P2 [The following information applies to the questions displayed below.]

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. Sales price per unit $ 310 per unit Units produced this year 100,000 units Units sold this year 104,000 units Units in beginning-year inventory 4,000 units Beginning inventory costs Variable (4,000 units × $140) $ 560,000 Fixed (4,000 units × $75) 300,000 Total $ 860,000 Manufacturing costs this year Direct materials $ 48 per unit Direct labor $ 68 per unit Overhead costs this year Variable overhead $ 3,400,000 Fixed overhead $ 7,000,000 Selling and administrative costs this year Variable $ 1,400,000 Fixed 4,600,000 Exercise 19-7 Part 1 1. Prepare the current-year income statement for the company using variable costing.

Answer 1

Solution:

Oak Mart Company
Variable Costing - Income Statement
Sale Revenue (104000*$310)		$3,22,40,000
Beginning Inventory
Variable	$5,60,000
Manufacturing Cost this year
Direct Material (100000*$48)	$48,00,000
Direct Labor (100000*$68)	$68,00,000
variable Overhead	$34,00,000
Selling and administrative cost:
Variable	$14,00,000
Total Variable cost		$1,69,60,000
Contribution margin		$1,52,80,000
Less: Fixed costs
Fixed Overhead	$70,00,000
Fixed Selling & Administrative Expenses	$46,00,000
Total Fixed Costs		$1,16,00,000
Net Income (Loss)		$36,80,000