Question

Sullivan Equipment Company
Variable Costing Income Statement
For the Month Ended March 31
Sales (14,200 units) $653,200
Variable cost of goods sold:
Variable cost of goods manufactured $288,000
Inventory, March 31 (1,800 units) (32,400)
Total variable cost of goods sold 255,600
Manufacturing margin $397,600
Variable selling and administrative expenses 170,400
Contribution margin $227,200
Fixed costs:
Fixed manufacturing costs $64,000
Fixed selling and administrative expenses 42,600
Total fixed costs 106,600
Income from operations $120,600
Prepare in income statement under absorption costing.

Answer 1

Answer:

Income statement under absorption costing

Sales (14,200 units)                                                                  $653,200

Less Cost of Goods Sold

Opening Inventory                                                      $0

Add Cost of Goods Manufactured                      $352,000

Less Closing Inventory (1,800 units × $22.00)   ($39,600)  ($312,400)

Gross Profit                                                                              $340,800

Less Expenses :

Variable selling and administrative expenses                      ($170,400)

Fixed selling and administrative expenses                            ($42,600)

Net Operating Income / (Loss)                                                $127,800

Explanation:

Manufacturing Cost Schedule :

Variable cost of goods manufactured $288,000

Add Fixed manufacturing costs              $64,000

Total Manufacturing Cost                      $352,000

Units Manufactured :

Units Sold                     14,200

Add Closing Stock         1,800

Less Opening Stock          0

Units Manufactured     16,000

Cost per unit manufactured = $352,000 /  16,000

                                              = $22.00