Jordan Glass Company makes stained glass lamps. Each lamp that it sells for $316.30 per lamp requires $16.50 of direct materials and $70.80 of direct labor. Fixed overhead costs are expected to be $189,000 per year. Jordan Glass expects to sell 1,000 lamps during the coming year. Selling and administrative expenses were zero.
Required
a. Prepare income statements using absorption costing, assuming that Jordan Glass makes 1,000, 1,250, and 1,500 lamps during the year.
b. Prepare income statements using variable costing, assuming that Jordan Glass makes 1,000, 1,250, and 1,500 lamps during the year.
Particulars | 1000 lamps | 1250 lamps | 1500 lamps |
Sales | 1000*316.30=316300 | 1250*316.30=395375 | 1500*316.30=474450 |
Less: Material Cost | 1000*16.50=16500 | 1250*16.50=20625 | 1500*16.50=24750 |
Less: Direct Labor | 1000*70.80=70800 | 1250*70.80=88500 | 1500*70.80=106200 |
Less: Fixed Cost | 1000*189=189000 | 1250*151.2=189000 | 1500*126=189000 |
Operating Profit | 40000 | 97250 | 154500 |
b)
PARTICULARS | 1000 LAMPS | 1250 LAMPS | 1500 LAMPS |
Sales | 316300 | 395375 | 474450 |
Less: Marginal Cost of Sales | |||
a) Material Cost | 16500 | 20625 | 24750 |
b) Labor Cost | 70800 | 88500 | 106200 |
contribution | 229000 | 286250 | 343500 |
Fixed Cost | 189000 | 189000 | 189000 |
Profit for the year | 40000 | 97250 | 154500 |
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