Question

Income Statements under Absorption and Variable Costing Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (16,000 units) $1,600,000 Production costs (21,000 units): Direct materials $777,000 Direct labor 373,800 Variable factory overhead 186,900 Fixed factory overhead 123,900 1,461,600 Selling and administrative expenses: Variable selling and administrative expenses $226,500 Fixed selling and administrative expenses 87,700 314,200 If required, round interim per-unit calculations to the nearest cent. b. Prepare an income statement according to the variable costing concept. Shawnee Motors Inc. Variable Costing Income Statement For the Month Ended August 31 Sales $ 1,600,000 Variable cost of goods sold Manufacturing margin $ Variable selling and administrative expenses Contribution margin $ Fixed costs: Fixed factory overhead $ Fixed selling and administrative expenses Total fixed costs Income from operations $

Answer 1

Number of units produced = 21,000

Variable Cost of Goods Produced = Direct Materials + Direct Labor + Variable Factory Overhead
Variable Cost of Goods Produced = $777,000 + $373,800 + $186,900
Variable Cost of Goods Produced = $1,337,700

Variable Cost per unit = Variable Cost of Goods Produced / Number of units produced
Variable Cost per unit = $1,337,700 / 21,000
Variable Cost per unit = $63.70

Variable Cost of Goods Sold = Variable Cost per unit * Number of units sold
Variable Cost of Goods Sold = $63.70 * 16,000
Variable Cost of Goods Sold = $1,019,200