Gias Foods produces frozen meals that it sells for 8 each Th

Gia\'s Foods produces frozen meals that it sells for $8 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Gia\'s Foods\' first month in business: January 2016 Units produced and sold Sales 950 meals Production 1,150 meals Variable manufacturing cost per meals 4 Sales commission cost per meal Total fixed manufacturing overhead 690 Total fixed selling and administrative costs 700 Reguirements Prepare income statements for January 2016 using a.Absorption costing

Solution

Income statement :

Sales (950*8)		7600
Less: Cost of goods sold
Variable manufacturing cost (950*4)	3800
Fixed manufacturing overhead (690/1150*950)	570
Total Cost of goods sold		4370
Gross profit		3230
Less: Variable selling and administrative expense	950
Less: Fixed selling and administrative expense	700
Total Selling and administrative expense		1650
Net operating income		1580