Question

On-Road Wheels, Inc. manufactures a basic road bicycle. Production and sales data for the most recent year are as follows (no beginning inventory): Variable production costs Fixed production costs Variable selling and administrative costs Fixed selling and administrative costs Selling price Production Sales $100 per bike $400,000 $22 per bike $550,000 $200 per bike 20,000 bikes 18,000 bikes (a) Prepare a brief income statement using absorption costing. ON-ROAD WHEELS, INC. Income Statement (Absorption Costing) Sales Less : e Textbook and Media

Answer 1

Answer with working is given below

On-Road Wheels Inc. Income Statement (Absorption Costing) Sales $3,600,000 Less: Cost of Goods Sold $2,160,000 Gross Profit $1,440,000 Less: Selling and Administration expense $946,000 Net Profit $494,000 Working note Fixed Production cost Total Bikes produced Fixed production cost per bike Variable production cost per bike $400,000 20,000 $20 $100 Total production cost per bike $120 Cost of Goods sold Bikes sold Production cost per bike Cost of Goods sold 18,000 $120 $2,160,000 18,000 Selling and administration expense Total Sales Variable selling and administration expense Total Variable S & A expenses Fixed S & A expense $22 $396,000 $550,000 Total Selling and administration expense $946,000