Midias Mechanical Company reconditions motors for Drift Racing cars. They bought
ID: 2438011 • Letter: M
Question
Midias Mechanical Company reconditions motors for Drift Racing cars. They bought a shipping container of 500 motors from Japan (model number ZF290) for $1,000,000. The reconditioning cost of each motor is $900 and the recomputing cost of each motor is $700. Commission on sales was paid to the head mechanic of Race Teams, at $80 per motor.
The average sale price of a ZF290 motor is $11,000. Administrative costs was $88,500 each year. In 2017, Midias Mechanical Company sold 100 motors and in 2018 sold 250 motors.
Requirement:
Prepare Absorption Income Statement for 2017
Prepare Absorption Income Statement for 2018
Prepare Variable Income Statement for 2017
Prepare Variable Income Statement for 2018
Note: you are required to show your workings
Explanation / Answer
Answer -
Given Information
Answer -
Given Information
Variable Cost Cost Unit Per Unit Cost Cost of Motor 1,000,000.00 500 2000 Reconditioning Cost 900 Recomputing cost 700 Sales Commission 80 Fixed Cost 88500 Absorption Income Statement Working 2017 Working 2018 Sales 11000*80 880,000 11000*250 2,750,000 Variable Cost Cost of Goods Sold =100*900 90000 =250*900 225000 Recomputing cost =100*700 70000 =250*700 175000 Gross Profit 720,000 2,350,000 Sales Commission =100*80 8000 =250*80 20000 Admin Cost 88500 88500 Net Profit 623,500 2,241,500 Variable Income Statement Working 2017 Working 2018 Sales 11000*80 880,000 11000*250 2,750,000 Variable Cost Cost of Goods Sold =100*900 90000 =250*900 225000 Recomputing cost =100*700 70000 =250*700 175000 Sales Commission =100*80 8000 =250*80 20000 Total Variable Cost 168000 420000 Contribution Margin =880000-168000 712,000 =2750000-420000 2,330,000 Fixed Admin Cost 88500 88500 Net Profit 623,500 2,241,500