Income Statement on June 30, the end of the first month of operations, Haman Com

ID: 2570606 • Letter: I

Question

Income Statement on June 30, the end of the first month of operations, Haman Company prepared the following Income statement, based on the absorption costing concept: Haman Company, tion Costing Income Statement 1,209,600 Cost of goods sold: $1,008,000 144,000 Less inventory, June 30 (2,400 units) Cost of goods sold... Gross profit. Selling and administrative expenses . . . . Income from operations 864,000 $ 345,600 23,120 $ 222,480 .. Assume the fixed manufacturing costs were $75,600 and the variable selling and administrative expenses were $68,400

Explanation / Answer

Haman Company

Variable Costing Income Statement fo

For the month ended June 30, 2015

Sales

$1,209,600

Variable cost of goods sold:

Variable cost of goods manufactured

$932,400

Less: Ending inventory

$133,200

Variable cost of goods sold

$799,200

Manufacturing margin

$410,400

Variable selling and administrative

$68,400

Contribution margin

$342,000

Fixed costs:

Fixed manufacturing costs

$75,600

Fixed selling and administrative expenses

$54,720

$130,320

Income from operations

$211,680

Cost of goods manufactured for 16,800 units, under absorption costing = $1,008,000

Cost of goods manufactured per unit = $1,008,000/16,800 = $60

Fixed manufacturing cost = $75,600

Fixed manufacturing cost per unit = 75,600/16,800 = $4.50

Variable cost of goods manufactured per unit = $60 - $4.5 = $55.50

Hence variable cost of goods manufactured = $55.50 x 16,800 = $932,400

Less: Value of Ending inventory, 2,400 units = $55.50 x 2,400 = $133,200

Variable cost of goods sold, 14,400 units = $799,200

Total S&A expense = $123,120

Less: Variable selling expense $68,400

Fixed selling and administration exp $54,720

The difference is due to the deferral fixed manufacturing overhead in the ending inventory under absorption costing, 2,400 units x $4.5 = $10,800