Question

Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,400 rackets and sold 5,300. Each racket was sold at a price of $94. Fixed overhead costs are $85,760 and fixed selling and administrative costs are $65,600. The company also reports the following per unit variable costs for the year:

Variable product costs	$	25.40
Variable selling and administrative expenses	$	2.40

Prepare an income statement under absorption costing.

ACES INC.
Absorption Costing Income Statement
Sales		$498,200
Less: Cost of goods sold
Variable production costs	134,620
Variable selling and administrative expenses	12,720
Total variable costs		147,340
Gross margin		350,860
Selling general and administrative expenses
Variable selling and administrative expenses	12,720
Fixed overhead costs
Total fixed expenses		12,720
Net income (loss)

i know the bottom chart is not correct so i need help figuring it out.

Answer 1

--Correct Answer

ACES INC.
Absorption Costing Income Statement
Sales	[5300 units x $ 94]	$498,200
Less: Cost of goods sold
Variable production costs [5300 units x $ 25.40]	$134,620
Fixed Overhead cost [ ($85760 / 6400 units) x 5300 units]	$71,020
Total Cost of Goods Sold		$205,640
Gross margin or Gross Profits		$292,560
Selling general and administrative expenses
Variable selling and administrative expenses [5300 units x $ 2.40]	$12,720
Fixed selling & admin cost	$65,600
Total Selling General & Admin expenses		$78,320
Net income (loss)		$214,240