On January 1 of the current year Townsend Co commenced opera

On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January: Units Production Sales ($18 per unit) Inventory, January 31 50,000 42,000 8,000 Manufacturing costs: $575,000 80,000 $655,000 Variable Fixed Total Selling and administrative expenses: $35,000 10,500 $45,500 Variable Fixed Total

Solution

Income statement Absorption costing Amount Amount Sales 756000 Cost of goods sold: Variable manf costs 575000 Fixed manf costs 67200 Cost of goods sold 642200 Gross profit 113800 Selling and adm exp 45500 Net profit 68300 Income statement Variable costing Amount Amount Sales 756000 Variable expenses: Manf costs 575000 Selling and adm 35000 Variable expenses 610000 Contribution 146000 Fixed costs: Fixed manf costs 80000 Selling and adm 10500 Total fixed costs 90500 Net income 55500