Question

AP-3A LO 2 3 4 Cameria Inc. is a publicly traded company that manufactures high quality headsets. The company has aske you to recommend a method of inventory costing. The compa ing. The company will use your recommendation to create the company's quarterly income statements. The following data are for the first two quarters of 2019, Q1 $50 $35 Variable Manufacturing Costs per unit manufactured Variable Advertising Costs per unit sold Fixed Manufacturing Overhead Costs Fixed Advertising Costs Selling Price per unit 02 $50 $35 $420,000 $105,000 $125 $420,000 $ 105,000 $125 0 Beginning Inventory (units) Production Volume Sales Volume 120,000 82,000 38,000 120,000 155,000 The company's policies used to prepare internal reports for management are closely aligned with the policies used to prepare statements for external users. Required a) For each quarter, prepare a contribution margin statement under variable costing. Kameria Inc. Contribution Margin Statement For the First Two Quarters in 2019 Q1 Q2

Answer 1

Requirement (a):

Kameria Inc.
Contribution Margin Statement
For the First Two Quarters in 2019
	Q1		Q2
Sales		$10,250,000		$19,375,000
Less: Variable Costs
Variable manufacturing costs	$4,100,000		$7,750,000
Variable Advertising costs	$2,870,000	$6,970,000	$5,425,000	$13,175,000
Contribution margin		$3,280,000		$6,200,000
Less: Fixed costs
Fixed manufacturing overhead costs	$420,000		$420,000
Fixed advertising costs	$105,000	$525,000	$105,000	$525,000
Net income		$2,755,000		$5,675,000

Explanations:

Sales = Sales volume x Selling price per unit

Variable manufacturing costs = Sales volume x Variable manufacturing costs per unit manufactured

Variable Advertising costs = Sales volume x Variable advertising costs per unit sold