Question

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business.

Sales price per unit	$	330	per unit
Units produced this year		105,000	units
Units sold this year		109,000	units
Units in beginning-year inventory		4,000	units
Beginning inventory costs
Variable (4,000 units × $140)	$	560,000
Fixed (4,000 units × $75)		300,000
Total	$	860,000
Manufacturing costs this year
Direct materials	$	42	per unit
Direct labor	$	64	per unit
Overhead costs this year
Variable overhead	$	3,400,000
Fixed overhead	$	7,000,000
Selling and administrative costs this year
Variable	$	1,400,000
Fixed		4,600,000

Exercise 19-7 Part 1

1. Prepare the current-year income statement for the company using variable costing.

Answer 1

1
OAK MART COMPANY
Variable Costing Income Statement
Sales		35970000	=109000*330
Less: Variable costs
Beginning inventory:
Variable costs	560000
Manufacturing cost this year
Direct materials	4410000		=105000*42
Direct labor	6720000		=105000*64
Variable overhead costs	3400000
Total variable costs available	15090000
Less: Ending finished goods inventory	0
Variable cost of goods sold	15090000
Variable selling and administrative expenses	1400000
Total variable costs		16490000
Contribution margin		19480000
Less: Fixed expenses
Fixed selling and administrative costs	4600000
Fixed overhead costs	7000000
Total fixed expenses		11600000
Net income (loss)		7880000