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 $205. Data for last year\'s operations follow: Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: 10,000 9,200 800 Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Total variable cost per unit 63 39 10 20 132 Fixed costs: Fixed manufacturing overhead Fixed selling and administrative Total fixed costs $ 310,0e0 500,000 810,000 Required 1. Assume that the company uses absorption costing. Compute the unit product cost for one barbecue grill. 2. Assume that the company uses absorption costing. Prepare an income statement for last year

Solution

1 Direct materials 63 Direct labor 39 Variable manufacturing overhead 10 Fixed manufacturing overhead 31 =310000/10000 Unit product cost 143 2 Sales 1886000 =9200*205 Cost of goods sold 1315600 =9200*143 Gross margin 570400 Selling and administrative expenses 684000 =500000+(9200*20) Net operating income(loss) -113600