Sims Company, a manufacturer of tablet computers, began operations on January 1,
ID: 2553335 • Letter: S
Question
Sims Company, a manufacturer of tablet computers, began operations on January 1, 2017. Its cost and sales information for this year follows. Manufacturing costs Direct materials Direct labor Overhead costs for the vear 40 per unit 60 per unit Variable overhead $3,300,000 $7,700,000 Fixed overhead Selling and administrative costs for the year Variable Fixed 700,000 $4,500,000 Production and sales for the year Units produced Units sold Sales price per unit 110,000 units 80,000 units 350 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? Complete this question by entering your answers in the tabs belowExplanation / Answer
Variable costing income statement Sales (80,000*350) 28000000 less:Variable expense Direct materials (80,000*40) 3200000 direct labor (80000*60) 4800000 Variable MOH (3300000/110000)*80000 2400000 variable selling &adm 700,000 total variable expense 11,100,000.0 contribution margin 16,900,000.0 Fixed expenses fixed overhead 7,700,000 fixed selling and administrative 4,500,000 total fixed expense 12,200,000 net income 4,700,000.0 Absorption costing income statement sales 28000000 less Cost of goods sold Direct materials (80,000*40) 3200000 direct labor (80000*60) 4800000 Variable MOH (3300000/110000)*80000 2400000 Fixed MOH (7700000/110000)*80000 5600000 cost of goods sold 16000000 Gross profit 12000000 Selling and administrative expense variable selling & adm expense 700,000 fixed selling & adm expense 4,500,000 total selling expense 5,200,000 net income 6,800,000 3) when all the units produced are sold and there is no beginning finished goods inventory