Question

Below is the variable costing income statement for South Bend Co.:

        

Sales, 6,000 units                                                                    $210,000

Total variable costs:

         Beg. inventory,           680 units             $13,600

         Variable manufacturing cost of

         goods manufactured,    ? units           + 132,000

         Ending inventory,     1,280 units           - (25,600)

         Variable manufacturing cost of goods $120,000

         Variable selling & admin. exp.             + 24,900     ($144,900)

Contribution margin                                                                $65,100

Total fixed costs:

         Fixed factory overhead                          $19,800

         Fixed selling and admin. expenses       + 15,300       ($35,100)

Operating income                                                                     $30,000

1. Prepare an absorption-costing income statement.
2. Reconcile the difference in income.

Answer 1

per unit overall cost
13600/680
20
using Absorption costing
sales				210000
production = 6000+1280-680	6600
fixed over head expenses per unit
19800/6600
3/ unit
per unit total cost = 20+3= 23
opening inventry	23	680	15640
Variable cost of goods manufactured	23	6600	151800
(closing stock )	23	1280	29440
total variable cost				138000
gross margiin (sales - variable cost)				72000
total selling and distribution expe	24,900+ 15300=			40200
operating income ( gross margin- selling overhead				31800