Question

On October 31, the end of the first month of operations, Maryville Equipment Company prepared the...

On October 31, the end of the first month of operations, Maryville Equipment Company prepared the following income statement, based on the variable costing concept:

Maryville Equipment Company
Variable Costing Income Statement
For the Month Ended October 31
Sales (220,000 units) $7,920,000
Variable cost of goods sold:
Variable cost of goods manufactured $6,360,000
Inventory, October 31 (45,000 units) (1,080,000)
Total variable cost of goods sold (5,280,000)
Manufacturing margin $2,640,000
Variable selling and administrative expenses (330,000)
Contribution margin $2,310,000
Fixed costs:
Fixed manufacturing costs $530,000
Fixed selling and administrative expenses 100,000
Total fixed costs (630,000)
Operating income $1,680,000

Prepare an income statement under absorption costing. This is what i have already, I just need remaining numbers

Maryville Equipment Company
Absorption Costing Income Statement
For the Month Ended October 31
Sales 7920000
Cost of goods sold:
Cost of goods manufactured 6890000
Inventory, October 31
Total cost of goods sold
Gross profit
Selling and administrative expenses 430000
Operating income

Homework Answers

Answer #1
  • No. of units produced = 220000 sold + 45000 ending units = 265,000 units
  • Fixed manufacturing overhead per unit = $ 530000 / 265000 = $ 2
  • Variable cost of goods manufactured per unit = $ 6360000 / 265000 = $ 24
  • Unit product cost = $ 24 + 2 = $ 26
  • Inventory, Oct 31 = 45000 units x ($24 + 2) = $ 1,170,000
  • Requirement asked

Maryville Equipment Company

Absorption Costing Income Statement

For the Month Ended October 31

Sales

$7,920,000

Cost of goods sold:

Cost of goods manufactured (265000 units x $ 26)

$6,890,000

Inventory, October 31

($1,170,000)

Total cost of goods sold

$5,720,000

Gross profit

$2,200,000

Selling and administrative expenses

[$ 330000 + 100000]

($430,000)

Operating income

$1,770,000

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