Question

Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (14,500 units) $2,030,000 Production costs (19,000 units): Direct materials $984,200 Direct labor 473,100 Variable factory overhead 235,600 Fixed factory overhead 157,700 1,850,600 Selling and administrative expenses: Variable selling and administrative expenses $286,800 Fixed selling and administrative expenses 111,000 397,800 Shawnee Motors Inc. assembles and sells MP3 players. The company began operations on August 1 and operated at 100% of capacity during the first month. The following data summarize the results for August: Sales (14,500 units) $2,030,000 Production costs (19,000 units): Direct materials $984,200 Direct labor 473,100 Variable factory overhead 235,600 Fixed factory overhead 157,700 1,850,600 Selling and administrative expenses: Variable selling and administrative expenses $286,800 Fixed selling and administrative expenses 111,000 397,800 . Prepare an income statement according to the absorption costing concept. Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31 Sales $ Cost of goods sold Gross profit $ Selling and administrative expenses Income from operations $

Answer 1

Solution:

Under the absorption costing first we need to find cost per unit.

Particulars	Amount($)
Direct materials	$984,200
Direct labor	$473,100
Fixed factory overhead	$157,700
Variable factory overhead	$235,600
Total cost of production	$1,850,600
Cost per unit	$97.4

Income statement under the absorption costing method.

Shawnee Motors Inc. Absorption Costing Income Statement For the Month Ended August 31
Particulars	Amount($)	Amount($)
Sales revenue		$2,030,000
Less: Cost of goods sold(14,500*97.4)		($1,412,300)
Gross profit		$617,700
Less: Selling and administrative expenses
Variable expenses	$286,800
Fixed expenses	$111,000	$397,800
Income from operations		$219,200