Question

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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		108,000	units
Units in beginning-year inventory		3,000	units
Beginning inventory costs
Variable (3,000 units × $135)	$	405,000
Fixed (3,000 units × $75)		225,000
Total	$	630,000
Manufacturing costs this year
Direct materials	$	42	per unit
Direct labor	$	66	per unit
Overhead costs this year
Variable overhead	$	3,200,000
Fixed overhead	$	7,600,000
Selling and administrative costs this year
Variable	$	1,350,000
Fixed		4,000,000

2. Prepare the current-year income statement for the company using absorption costing.

Answer 1

particulars		amount($)
sales revenue	108000x$330	35640000
less:cost of goods sold
opening inventory	630000
cost of goods manufactured(105000x210.9)	22144500
cost of goods available for sale	22774500
less:closing stock	0	22774500
gross profit		12865500
less:selling and administrative expenses
variable	1350000
fixed	4000000	5350000
net operating income		7515500

calculation:-

production cost per unit of current year

particulars	amount($)
direct material	42
direct labour	66
variable overhead (3200000/105000)	30.5
fixed overhead(7600000/105000)	72.4
production cost per unit	210.9