Question

Sunny Inc. had the following amounts for the year: Direct materials $10 per unit Direct Labor $12 per unit Variable overhead $6 per unit Fixed overhead $90,000 Variable selling expenses $3 per unit Fixed selling and admin. expenses $130,000 75,000 units produced 65,000 units sold at $45 each

Calculate the ABSORPTION product cost per unit and prepare an Income Statement under Absorption Costing in order to fill in the rest of the information. (Remember you can submit your calculations for possible partial credit.)

Absorption product cost per unit $ =

Total Sales in dollars $ =

Gross Profit $ =

Net Income $ =

Answer 1

Direct material	$ 10
Direct labor	$ 12
Variable manufacturing overhead	$    6
Fixed manufacturing overhead ($900,000/75,000)	$ 12
Absorption product cost per unit	$ 40

Sunny Inc
Income Statement (Absorption costing)
Sales (65,000*$45)	$ 2,925,000
Less: Cost of goods sold (65,000*$40)	$ 2,600,000
Gross profit	$     325,000
Less: Selling and administrative expenses ($130,000+(65,000*$3))	$     325,000
Net income	$                   -

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