need help solving problem Assignment 19A 15 pts Question 6 o

need help solving problem

Assignment 19A (15 pts) Question 6 (of 8) 6. 150 points value Quick Study 19-4 Absorption costing income statement LO P2 Aces Inc., a manufacturer of tennis rackets, began operations this year The company produced 6200 rackets and sold 5,100. Each racket was sold at a price of $92. Fixed overhead costs are $81,840 and fixed selling and administrative costs are $65,400. The company also reports the following per unit costs for the year ariable production costs 25.20 220 Variable selling and administrative expenses Required: Prepare an income statement under absorption costing ACES INC. Absorption Costing Income Statement Sales $469,200 ss: Cost of goods sold Variable production costs 128,520 Cost of goods sold Gross margi Selling general and administrative expenses 128,520 340 680 Fixed selling and administrative costs 65 400 Total fixed expenses Net income (loss) 65,400 $ 193,440

Solution

Explanation

(1) Sales are obtained by multiplying with 5100 units sold. But variable production cost is to be multiplied with 6200 units produced.

(2) There is ending inventory = 6200 - 5100 = 1100. Value of these units = 238080 * 1100 / 6200 = 42240 this is deducted from production cost to get cost of goods sold.

(3) Sales - cost of goods sold = gross margin

(4) Variable Selling, general and admin expenses are multiplied with number of units sold. Fixed selling and admin expenses are treated as period cost hence charged in full.

Sales		469200
(-) Cost of goods sold
Variable production cost	156240
Fixed Overhead cost	81840
Ending Inventory	-42240
Cost of goods sold		280320
Gross margin		188880
Selling general and adm
Variable selling and adm	11220
fixed selling and adm	65400
Total Operating cost		76620
Net Income		112260