The company produces the same number of units every month, although the sales in

Question

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

a. Prepare a contribution format income statement for the month using variable costing.
b. Prepare an income statement for the month using absorption costing.

Selling price... $92 Units in beginning inventory Units produced. 300 5,900 6,000 200 13), Variable costs per unit: $39 $19 $2 $11 Direct materials. Direct labor. Variable manufacturing overhead.. Fixed costs: $88,500 $36,000 Fixed selling and administrative

Explanation / Answer

a. Aldene Company (Contribution Format)     Variable Costing Income Statement For the Month Sales (6000*92) 552000 Variable cost of goods sold: Variable cost of goods produced(5900 units)     Direct materials (39*5900) 230100     Direct labor(19*5900) 112,100     Variable manufacturing cost(2*5900) 11,800 Variable mfg. costs of goods produced 354000 Add: Variable Mfg. Cost of beginning Inventory(300*(39+19+2) 18000 Less: Variable Mfg. Cost of Ending Inventory(200*(39+19+2)) 12000 Variable mfg. costs of Good sold(6000 units) 360000 Manufacturing margin 192000 Variable S&A -- 6000*11 66000 Contribution margin 126,000 Less: Fixed costs: Fixed manufacturing costs 88500 Fixed selling and administrative expenses 36000 Total fixed costs 124500 Income from operations 1500 b. Aldene Company Absorption(Full) Costing Income Statement For the Month Sales (6000*92) 552000 Cost of goods sold: Cost of goods produced this month (5900 units)     Direct materials (39*5900) 230100     Direct labor(19*5900) 112,100     Variable manufacturing cost(2*5900) 11,800     Fixed manufacturing cost 88,500 Total cost of goods produced in the month 442500 Add: Cost of beginning Inventory(300 units) 22500 Total cost of goods available for sale 465000 Less: Cost of Ending Inventory(200 Units) 15000 Total cost of goods sold (6000 units) 450000 Gross profit 102000 Selling and administrative expenses(6000*11)+36000 102000 Income from operations 0 Full Cost of beginning inventory (39+19+2)*300+(88500/5900*300)= 22500 Full Cost of Ending inventory (39+19+2)*200+(88500/5900*200)= 15000 Reconciliation between both Income From Operations Income As per Variable costing 1500 Less: Fixed costs included in beg. inventory(88500/5900*300) 4500 Add: Fixed costs deferred in ending inventory(88500/5900*200) 3000 Income as per absorption costing 0

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