Map Company, which has only one product, has provided the following data concern
ID: 2549939 • Letter: M
Question
Map Company, which has only one product, has provided the following data concerning its most recent month of operations:
Selling price...............................................
$140
Units in beginning inventory.....................
0
Units produced..........................................
7,400
Units sold..................................................
7,200
Units in ending inventory..........................
200
Variable costs per unit:
Direct materials.......................................
$42
Direct labor.............................................
$32
Variable manufacturing overhead...........
$1
Variable selling and administrative.........
$8
Fixed costs:
Fixed manufacturing overhead................
$280,800
Fixed selling and administrative..............
$98,000
Required:
Prepare an income statement for the month using the contribution format and the variable costing method.
Prepare an income statement for the month using the absorption costing method.
Selling price...............................................
$140
Units in beginning inventory.....................
0
Units produced..........................................
7,400
Units sold..................................................
7,200
Units in ending inventory..........................
200
Variable costs per unit:
Direct materials.......................................
$42
Direct labor.............................................
$32
Variable manufacturing overhead...........
$1
Variable selling and administrative.........
$8
Fixed costs:
Fixed manufacturing overhead................
$280,800
Fixed selling and administrative..............
$98,000
Explanation / Answer
Prepare an income statement for the month using the contribution format and the variable costing method.
Prepare an income statement for the month using the absorption costing method.
Sales (7200*140) 1008000 Less: Variable cost of goods sold (7200*75) (540000) Less; Variable selling and administrative expense (7200*8) (57600) Total variable cost (597600) Contribution margin 410400 Less: Fixed manufacturing overhead (280800) Less: FIxed selling and administrative expense (98000) Total fixed cost (378800) Net operating income 31600