O Show Me How Calculator Income Statements under Absorption

O Show Me How Calculator Income Statements under Absorption and Variable Casting Shawnee Motors Inc. assembles and sells MP3 players. The company began oper data summarize the results for August Sales (10,000 units) Production costs (13,000 units): ations on August 1 and operated at 100% of capacity during the first month. The following $900,000 Direct materials Direct labor Variable factory overhead Fixed factory overhead $432,900 208,000 104,000 68,900 813,800 Selling and administrative expenses $126,100 Variable selling and administrative expenses 48,800 174,900 Fixed selling and administrative expenses If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept Shawnee Motors Inc. Absorption Costing Income Statement

Solution

MANUFACTURING AND DETAILS ARE AS BELOW Unit Produced = $                       13,000 Units Unit Sold = $                       10,000 Units Closing Stock $                          3,000 Units Selling Price Per unit $                          90.00 Per Units Variable Selling Expenses p.U $                          12.61 Per Units Fixed Selling and administration Expenses $                       48,800 STEP : 1 CALCULATION OF FIXED OVERHEAD RECOVERY RATE FOR ABSORPTION COSTING Fixed Manufacturing Overhead = $                       68,900 \"/ \" By Units Produced = $                       13,000 Fixed overhead recovery Rate = $                            5.30 STEP : 2 CALCUALTION OF cost of production units by using absorption and variable Costing Particulars Absorption Costing Amount Variable Costing Amount Direct Material Per unit $                          33.30 $                          33.30 (\'$ 432,900 /13000 units) Direct Labour Per Unit $                          16.00 $                          16.00 ($208,000/13,000 units) Vairable Manufacturing Overhead $                            8.00 $                            8.00 ($104,000 / 13,000 units) Fixed Manufacturing Overhead $                            5.30 $                                 -   Cost of Production per unit $                          62.60 $                          57.30 STEP 3: Income statement as per Absorption Costing ABOSRPTION COSTING INCOME STATEMENTS Absorption Costing Particulars Amount Sales $                    9,00,000 Cost of Goods Sold Beginning inventory $                                 -   Cost of Goods Manufactured (13,000 Units X $ 62.60 Per unit) $                    8,13,800 Less: Ending Inventory (3,000 units $ 62.60 Per Unit) $                    1,87,800 Cost of Goods Sold $                    6,26,000 Gross Profit $                    2,74,000 Less : Selling Expenses Fixed Selling Expenses $                       48,800 Variable Selling Expenses $                    1,26,100 Net Income $                       99,100 STEP 4: INCOME STATEMENT AS PER VARIABLE COSTING VARIABLE COSTING INCOME STATEMENTS Variable Costing Particulars Amount Sales $                    9,00,000 Cost of Goods Sold Beginning inventory $                                 -   Cost of Goods Manufactured (13,000 Units X $ 57.30 Per unit) $                    7,44,900 Less: Ending Inventory (3,000 units $ 57.30 Per Unit) $                    1,71,900 Cost of Goods Sold $                    5,73,000 Selling Variable Expenses $                    1,26,100 Gross Profit $                    2,00,900 Less: Fixed Manufacturing overhead $                       68,900 Less : Fixed Selling Expenses $                       48,800 Net Income $                       83,200