Question

Direct Materials          $10 per unit Direct Labor                $20 per unit Variable OH costs    $10 per unit...

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

Homework Answers

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
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