Question

Wu Equipment Company manufactures and distributes industrial air compressors. The following data are available for the year ended December 31, 2020. The company had no beginning inventory. In 2020, it produced 1,470 units but sold only 1,220 units. The unit selling price was $4,410. Costs and expenses were as follows: Variable costs per unit Direct materials $750 Direct labour 1,360 Variable manufacturing overhead 200 Variable selling and administrative expenses 70 Annual fixed costs and expenses Fixed manufacturing overhead $1,200,000 Selling and administrative expenses 105,000

a) Prepare a 2020 income statement for Wu Company using variable costing.

Answer 1

a) Prepare a 2020 income statement for Wu Company using variable costing.

Sales (1220*4410)		5380200
Less: Variable cost of goods sold
Direct material (1220*750)	915000
Direct labour (1360*1220)	1659200
Variable manufacturing overhead (200*1220)	244000
Total variable cost of goods sold		2818200
Manufacturing margin		2565000
variable selling and administrative expense		85400
Contribution margin		2476600
Fixed Cost
Fixed manufacturing overhead	1200000
Fixed selling and administrative expense	105000
Total fixed cost		1305000
Net operating income		1171600