Question

O Show Me How Calculator Income Statements under Absorption and Variable Casting Shawnee Motors Inc. assembles and sells MP3 players. The company began oper data summarize the results for August Sales (10,000 units) Production costs (13,000 units): ations on August 1 and operated at 100% of capacity during the first month. The following $900,000 Direct materials Direct labor Variable factory overhead Fixed factory overhead $432,900 208,000 104,000 68,900 813,800 Selling and administrative expenses $126,100 Variable selling and administrative expenses 48,800 174,900 Fixed selling and administrative expenses If required, round interim per-unit calculations to the nearest cent. a. Prepare an income statement according to the absorption costing concept Shawnee Motors Inc. Absorption Costing Income Statement

Answer 1

	MANUFACTURING AND DETAILS ARE AS BELOW
	Unit Produced =	$                       13,000	Units
	Unit Sold =	$                       10,000	Units
	Closing Stock	$                          3,000	Units
	Selling Price Per unit	$                          90.00	Per Units
	Variable Selling Expenses p.U	$                          12.61	Per Units
	Fixed Selling and administration Expenses	$                       48,800
	STEP : 1
	CALCULATION OF FIXED OVERHEAD RECOVERY RATE FOR ABSORPTION COSTING
	Fixed Manufacturing Overhead =	$                       68,900
	"/ " By Units Produced =	$                       13,000
	Fixed overhead recovery Rate =	$                            5.30
	STEP : 2
	CALCUALTION OF cost of production units by using absorption and variable Costing
	Particulars	Absorption Costing Amount	Variable Costing Amount
	Direct Material Per unit	$                          33.30	$                          33.30	('$ 432,900 /13000 units)
	Direct Labour Per Unit	$                          16.00	$                          16.00	($208,000/13,000 units)
	Vairable Manufacturing Overhead	$                            8.00	$                            8.00	($104,000 / 13,000 units)
	Fixed Manufacturing Overhead	$                            5.30	$                                 -
	Cost of Production per unit	$                          62.60	$                          57.30
	STEP 3: Income statement as per Absorption Costing
	ABOSRPTION COSTING INCOME STATEMENTS	Absorption Costing
	Particulars	Amount
	Sales	$                    9,00,000
	Cost of Goods Sold
	Beginning inventory	$                                 -
	Cost of Goods Manufactured (13,000 Units X $ 62.60 Per unit)	$                    8,13,800
	Less: Ending Inventory (3,000 units $ 62.60 Per Unit)	$                    1,87,800
	Cost of Goods Sold	$                    6,26,000
	Gross Profit	$                    2,74,000
	Less : Selling Expenses
	Fixed Selling Expenses	$                       48,800
	Variable Selling Expenses	$                    1,26,100
	Net Income	$                       99,100
	STEP 4: INCOME STATEMENT AS PER VARIABLE COSTING
	VARIABLE COSTING INCOME STATEMENTS	Variable Costing
	Particulars	Amount
	Sales	$                    9,00,000
	Cost of Goods Sold
	Beginning inventory	$                                 -
	Cost of Goods Manufactured (13,000 Units X $ 57.30 Per unit)	$                    7,44,900
	Less: Ending Inventory (3,000 units $ 57.30 Per Unit)	$                    1,71,900
	Cost of Goods Sold	$                    5,73,000
	Selling Variable Expenses	$                    1,26,100
	Gross Profit	$                    2,00,900
	Less: Fixed Manufacturing overhead	$                       68,900
	Less : Fixed Selling Expenses	$                       48,800
	Net Income	$                       83,200