Instructions 03 1200,00000 850000.00 00,000.00 6150000.00 Direct labor Variable
ID: 2572364 • Letter: I
Question
Instructions 03 1200,00000 850000.00 00,000.00 6150000.00 Direct labor Variable manufacturing cos Fixed manufacturing cost Selling and administrative expenses 8 Variable 572,00000 Fixed 52,00000 924000.00 Required: 1· Prepare an income statement based on the absorption costing concept.. 2. Prepare an income statement based on the variable costing concepe . Explain the reason for the aifference in the amount of income from operations reported in (1) and (2) Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. A colon () ww automaticaly appear W required. Enter Inventory, August 31 as a negative number using a minus sign. If a net loss is incurred, enter that amount as a negative number using a minus sign.
Explanation / Answer
Sales = $9,240,000
Units Sold = 44000 Units
Selling price = $9,240,000/44000
$210/unit
Closing Stock
Manufactured 50000 units
Sold units 44000 units
Closing Stock = 50000-44000
1) Income statement based on Absorption costing concept
Absorption costing
Sales
92,40,000.00
Opening Stock
-
Cost of production
Direct Material
35,00,000.00
Direct Labour
12,00,000.00
Variable Cost
8,50,000.00
Less: Cost of closing stock
6,66,000.00
Cost of sales
55,50,000.00
Fixed cost
6,00,000.00
Cost of goods sold
61,50,000.00
Selling and administrative expense
9,24,000.00
Variable
5,72,000.00
Fixed
3,52,000.00
Profit
21,66,000.00
2) Income statement based on Variable costing concept
Variable costing
Sales
92,40,000.00
Opening Stock
-
Cost of production
Direct Material
30,80,000.00
Direct Labour
10,56,000.00
Variable Cost
7,48,000.00
Less: Cost of closing stock
6,66,000.00
Variable
5,03,360.00
Cost of goods sold
53,87,360.00
Contribution Margin
38,52,640.00
Less: Fixed stock
Manufacturing
6,00,000.00
Selling and administrative expense
3,52,000.00
Profit
29,00,640.00
3) Major difference between Variable costing and Absorption costing
Variable costing is costing method where variable cost are charged to cost units and fixed costs are written off in full against the aggregate contribution, marginal costing will consider the complete overhead (fixed cost) incurred in a period and variable cost for the unit sold.
Absorption costing is a costing method which assigns all the costs i.e both fixed and variable cost, to product cost or cost of service rendered and also for the units sold.
Sales = $9,240,000
Units Sold = 44000 Units
Selling price = $9,240,000/44000
$210/unit