The details relating to the revenues and costs of Crescent Industries Limited, f
ID: 2591827 • Letter: T
Question
The details relating to the revenues and costs of Crescent Industries Limited, for the year ended December 31, 2016 are given below: Revenue Sales 25,000/- units Sales price $ 50/- per unit Variable cost Material cost $ 11/- per unit Labour cost $ 9/- per unit Variable factory overhead cost AE 7/- per unit Variable selling/marketing expenses $ 5/- per unit Variable administrative expenses $ 3/- per unit Fixed cost Fixed factory overhead cost $ 50,000/- Fixed selling/marketing expenses $ 30,000/- Fixed administrative expenses $ 20,000/- Note There is no ending inventory. Accurately apply a range of management accounting techniques (i.e. absorption costing technique and marginal/variable costing technique) and prepare the financial reporting documents of Crescent Industries Limited,.
Explanation / Answer
Variable-costing income statements Sales $1,250,000 (25,000 x $50) Variable expenses: Material $275,000 (25,000 x $11) Labour $225,000 (25,000 x $9) Variable factory overhead $175,000 (25,000 x $7) Variable selling/marketing expenses $125,000 (25,000 x $5) Variable administrative expenses $75,000 (25,000 x $3) Contribution margin $375,000 Fixed expenses: Factory overhead cost $50,000 Selling/marketing expenses $30,000 Administrative expenses $20,000 Operating Income $275,000 Absorption-costing income statements Sales $1,250,000 (25,000 x $50) Cost of goods sold Beginning Inventory $0 variable $675,000 (25,000 x $27) Fixed $50,000 Subtotal $725,000 Ending Inventory $0 Total COGS $725,000 Gross Margin $525,000 Selling and adminstrative expenses: Fixed ($30,000 + $20,000) $50,000 Varaible ($5 + $3) $200,000 Operating Income $275,000