Che Exercise 6-3 Income reporting under absorption costing and variable costi Si
ID: 2602808 • Letter: C
Question
Che Exercise 6-3 Income reporting under absorption costing and variable costi Sims Company, a manufacturer of tablet computers, began operations on January 1,2017 lts cost and sales information for this year follows Manufacturing costs Direct materiais Direct labor Overhead costs for the year :30;per unit 5e pec unit Variable overhead $3,000,eee Fixed dverhead Selling and admintstrative costs for the year Variable Fixed 541258 808 Productiion and seles for the year uniss produced units sotd sales price pir unis 1. Prepare an incomé statement fori the year using variable costing 2. Prepare an income statement for the year using absorption costing 3. Under what crcumstance is reported income identical under both absorpsion costing and variabie costing?Explanation / Answer
1) VARIABLE COST INCOME STATEMENT Sales (70000*$360) 25200000 Less: Variable costs Direct materials 2100000 Direct labor 3500000 Variable overhead costs 3000000 Variable selling and administrative expenses 800000 Total variable costs 9400000 Contribution margin 15800000 Less: Fixed expenses: Manufacturing 7000000 Selling and administrative 4250000 Total fixed expenses 11250000 Net Income (Loss) 4550000 2) ABSORPTION COSTING INCOME STATEMENT Sales 25200000 Less: Cost of goods sold Direct materials 2100000 Direct labor 3500000 Variable overhead costs 3000000 Fixed overhead costs (7000000*70000/100000) 4900000 Cost of goods sold 13500000 Gross Margin 11700000 Selling and administrative expenses: Variable selling and administrative expenses 800000 Fixed selling and administrative expenses 4250000 Total selling and administrative expenses 5050000 Net Income (Loss) 6650000 3) When production equals sales and there are no beginning or ending stock of finished goods.