Question

Preparing variable costing income statements, production exceeds sales

ReVitalAde produced 13,000 cases of powdered drink mix and sold 12,000 cases in April 2018. The sales price was $29, variable costs were $12 per case ($9 manufacturing and $3 selling and administrative), and total fixed costs were $100,000 ($91,000 manufacturing overhead and $9,000 selling and administrative). The company had no beginning Finished Goods Inventory.

Requirements
(1) Prepare the April income statement using variable costing.
(2) Determine the product cost per unit

Answer 1

Answer:

(1) Prepare the April income statement using variable costing.

+ Revenues  = 12000*29= 348000

Variable expenses

-  production  = 12000*9=   84000

- selling & admin= 12000*3=    36000

= Contribution margin  228000

Fixed Expenses

- Production                91000

- selling and administrative     9000

= Net profit or loss   128000

(2) Determine the product cost per unit

Manufacturing Cost/unit

variable cost = $9

Manufacturing Overheads = 91,000/13000 = $7

Total product cost per unit = $9+$7 = $16