Chuck Wagon Grills Inc makes a single producta handmade spec

Chuck Wagon Grills, Inc., makes a single product-a handmade specialty barbecue grill that it sells for $300. Data for last year\'s operations follow: Units Units produced Units sold Units in ending inventory Variable costs per unit: in beginning inventory 9,900 8,700 1,200 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 60 20 10 30 120 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs $ 200,000 1,240,000 $1,440,000 Assume that the company uses variable costing. Prepare a contribution format income statement for last year. Chuck Wagon Grills, Inc. Variable Costing Income Statement

Solution

Variable costing income statement :

Sales (8700*300)		2610000
Variable cost of goods sold
Direct material	522000
Direct labour	174000
Variable manufacturing overhead	87000	783000
Manufacturing margin		1827000
Variable selling and administrative expense		261000
Contribution margin		1566000
Fixed Cost
Fixed manufacturing cost	200000
FIxed selling and administrative expense	1240000	1440000
Net operating income		126000