Problem 2 (10 points total) cost structure for Chiang Company, which began opera

Question

Problem 2 (10 points total) cost structure for Chiang Company, which began operations on January 1, is provided below: Direct materials Direct labor Manufacturing overhead S18 per unit $14 per unit $8 per unit $20.000 (55.00 per unit) 3,500 12.000 Variable Fixed Variable selling and admin Fixed selling and admin. Variable selling and administrative costs are $4 per unit solod. During the year, the company produced 4,000 units and sold 3,500 units at the $60 selling price. Required: 1) Prepare an income statement under absorption costing. 2) Prepare an income statement under variable costing. 3) Explain the difference between the two income amounts 1) Income statement under absorption costing: Sales Cost of goods sold Beginming imventory V aniable and fixed manufacturing costs Cost of goods available for sale Less ending imventory Ciross margm l ess operating costs V aniable seling and adninistrative costs F pued selling and adinunistrative costs

Explanation / Answer

1.

2.

3. Under abosrprion costing fixed manufacturing overhead will allocate to product based number of units produced. so ending inventory value will include portion of fixed manufacturing cost. under variable costing entire fixed manufacturing overhead will consider as an expense for the year

Income Statement Absorption Costing Sales (3,500*$60) $ 210,000 Less: Cost of Goods Sold (3,500*($18+$14+$8+$5) $ 157,500 Gross Margin $    52,500 Less: Selling and administrative expense Variable   $    3,500 Fixed $ 12,000 Total selling and administrative expense $    15,500 Net income (loss) $    37,000

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---