Security Technology Inc. (STI) is a manufacturer of an electronic control system
ID: 2555869 • Letter: S
Question
Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $45 per unit and had sales of 24,800 units in the current year, 2015. STI has no inventory on hand at the beginning of 2015 and is projecting sales of 28,400 units in 2016. STI is planning the same production level for 2016 as in 2015, 26,600 units. The variable manufacturing costs for STI are $16 and the variable selling costs are only $0.70 per unit. The fixed manufacturing costs are $133,000 per year and the fixed selling costs are $660 per year. Required: 1. Prepare an income statement for each year using full costing. (Round your final answers to nearest whole dollar amount.) SECURITY TECHNOLOGY INC Full Costing Income Statement 2015 2016 Less: Cost of goods sold Available for sale Cost of goods sold Gross margin Less selling and administrative costs Operating incomeExplanation / Answer
Income statement-Full Costing 2015 2016 Sales revenue 1116000 1278000 Lless: Cost of Goods sold Beginning Inventory 0 37800 Variable manufacturing Cost 425600 425600 Fixed manufacturing Cost 133000 133000 Available for sale 558600 596400 Less: Ending Inventory 37800 0 (558600/26600*1800) Cost of Goods sold 520800 596400 Gross margin 595200 681600 Less: Selling and Admin OH Variable Selling 17360 19880 Fixed Admin 660 660 Operating Income 577180 661060 Income Statement-variable Costing 2015 2016 Sales revenue 1116000 1278000 Lless: Cost of Goods sold Beginning Inventory 0 28800 Variable manufacturing Cost 425600 425600 Available for sale 425600 454400 Less: Ending Inventory 28800 0 (425600/26600*1800) Cost of Goods sold 396800 454400 Variable Selling OH 17360 19880 Total variable Cost 414160 474280 Contribution margin 701840 803720 Fixed manufacturing cost 133000 133000 Fixed Admin 660 660 Net operating income 568180 670060 RECONCILIATION STATEMENT 2015 2016 Change in Inventory Iin units 1800 -1800 Multiply times fixed OH per unit 5 5 Difference in operating income 9000 -9000