During the first month of operations which ended February Sm

During the first month of operations which ended February, Smooth Skin Care Products manufactured 10,000 bottles, of which 8,000 were so Operating data for the month are as follows: Production costs (10,000 bottles); Direct materials Direct labor Variable factory overhead Fixed factory overhead $140,000 40,000 20,000 ?4.000 $204,000 Operating expenses: Variable operating expenses Fixed operating expenses $34,000 2,000 36.000 Sales total $300,000 for the month. During March, Smooth Skin manufactured 6,000 bottles and 8,000 were sold. Operating data for March are as follows: Production costs (6,000 bottles): Direct materials Direct labor Variable factory overhead Fixed factory overhead 84,000 24,000 12,000 -4.000 $124,000 Operating expenses: Variable operating expenses Fixed operating expenses 34,000 36,

Solution

Construct The Absorption Costing Unit Product Cost Feb March Direct Material 14 14 Direct labour 4 4 Variable Manufacturing overheads 2 2 Fixed Manufacturing overheads 0.40 0.67 Absorption costing unit prroduct cost 20.40 20.67 Construct the Absorption Costing Income Statement Under FIFO Feb Mar Sales $300,000 $300,000 Cost of Goods sold 163200 164820 Gross Margin $136,800 $135,180 Selling and distribution expense 36,000 36,000 Net operating income 100,800 99,180 Compute the Variable costing Unit Product cost Feb Mar Direct Material 14 14 Direct labour 4 4 Variable Manufacturing overheads 2 2 Variable costing unit prroduct cost 20 20 Construct The Variable Costing Income Statement under FIFO Feb March Sales 300,000 300,000 Less: Variable cost    variable cost of goods sold 160,000 160,000    Variable selling expense 34,000 194,000 34,000 194,000 Contribution margin 106,000 106,000 Fixed expense:    Fixed Manufacturing overheads 4,000 4,000    Fixed selling expense 2,000 2,000 Net operating Income 100,000 100,000