Question

Direct Materials          $10 per unit

Direct Labor                $20 per unit

Variable OH costs    $10 per unit

Fixed OH costs         $240,000 per year

     In addition to the information provided above the Company also had:

              Variable selling and administrative expenses    $4 per unit

               Fixed selling and administrative expenses     $120,000 per year

     Prepare and Income Statement for Vijay Company using the traditional absorption costing method and an income statement using the variable costing method assuming they sold 30,000 units at a sales price of $70 per unit. (Round all of your answers to the nearest whole dollar.)

         Income Statement (Traditional Absorption Costing)

Sales
Cost of Goods Sold
Gross Margin
Selling and administrative expenses
Net income

                  Income Statement (Variable Costing)

Sales
Variable Expenses:
Variable production costs
Variable selling & admin. costs
Contribution Margin
Fixed Expenses:
Fixed Overhead
Fixed selling & admin. expenses
Net income

Answer 1

Income statement (Traditional approach)

Sales (30000*70)	2100000
Cost of goods sold (	1440000
Gross margin	660000
Selling and administrative expense (30000*4+120000)	240000
Net operating income	420000

Contribution margin income statement

Sales	2100000
Variable expenses
Variable production costs	1200000
Variable selling & admin. costs	120000
Contribution margin	780000
Fixed Expenses:
Fixed Overhead	240000
Fixed selling & admin. expenses	120000
Net Income	420000