Check Exercise 6- 3 Income reporting under absorption costing and variable costi
ID: 2433248 • Letter: C
Question
Check Exercise 6- 3 Income reporting under absorption costing and variable costing LO P2 Sims Company, a manufacturer of tablet computers, began operations on January 1, 2017 ts cost and sales information for this year follows Manufacturing costs Direct materials Direct labor Overhead costs for the year 35 per unit 55 per unit Variable overhead $3,300,800 57,700,000 Fixed overhead Selling and administrative costs for the year Variable Fixed $4,758,88 Production and sales for the year Units produced Units sold Sales price per unit 110,000 units 80,800 units $360 per unit 1. Prepare an income statement for the year using variable costing. 2. Prepare an income statement for the year using absorption costing 3. Under what circumstance(s) is reported income identical under both absorption costing and variable costing?Explanation / Answer
Variable costing income statement Sales (80,000*360) 28800000 less:Variable expense Direct materials (80,000*35) 2800000 direct labor (80000*55) 4400000 Variable MOH (3300000/110000)*80000 2400000 variable selling &adm 800,000 total variable expense 10,400,000.0 contribution margin 18,400,000.0 Fixed expenses fixed overhead 7,700,000 fixed selling and administrative 4,750,000 total fixed expense 12,450,000 net income 5,950,000.0 Absorption costing income statement sales 28800000 less Cost of goods sold Direct materials (80,000*35) 2800000 direct labor (80000*55) 4400000 Variable MOH (3300000/110000)*80000 2400000 Fixed MOH (7700000/110000)*80000 5600000 cost of goods sold 15200000 Gross profit 13600000 Selling and administrative expense variable selling & adm expense 800,000 fixed selling & adm expense 4,750,000 total selling expense 5,550,000 net income 8,050,000 3) when all the units produced are sold and there is no beginning finished goods inventory