Question

Jordan Glass Company makes stained glass lamps. Each lamp that it sells for $316.30 per lamp...

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.

Business   Accounting   
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Answer #1
a) INCOME STATEMENT (Absorption Costing)
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)

Income statement (Variable Costing)
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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