Question

Pharoah Corporation accumulates the following data relative to jobs started and finished during the month of June 2020.

Costs and Production Data		Actual		Standard
Raw materials unit cost		$2.30		$2.20
Raw materials units		11,100		10,300
Direct labor payroll		$170,200		$164,160
Direct labor hours		14,800		15,200
Manufacturing overhead incurred		$202,600
Manufacturing overhead applied				$205,200
Machine hours expected to be used at normal capacity				43,500
Budgeted fixed overhead for June				$65,250
Variable overhead rate per machine hour				$3.00
Fixed overhead rate per machine hour				$1.50

Overhead is applied on the basis of standard machine hours. 3.00 hours of machine time are required for each direct labor hour. The jobs were sold for $460,000. Selling and administrative expenses were $42,100. Assume that the amount of raw materials purchased equaled the amount used

Prepare an income statement for management. (Ignore income taxes.)

Answer 1

Answer:

Pharoah CORPORATION
Income Statement
For the Month Ended June 30, 2020
	Amount($)	Amount($)
Sales revenue		4,60,000
Cost of goods sold (at standard)((10300*2.2)+164160+205200)		3,92,020
Gross profit (at standard)		67,980
Variances
Materials price(2.30-2.20)*11100	1,110	F
Materials quantity(11100-10300)*2.20	1,760	F
Labor price(170200/14800)-(164160/15200)*14800	10,360	F
Labor quantity(14800-15200)*(164160/15200)	-4,320	U
Overhead(202600-205200)	-2,600	U
Total variance—favorable		6,310
Gross profit (actual)		61,670
Selling and administrative expenses		42,100
Net income		25,690