Question

The following information pertains to the first year of operation for Crystal Cold Coolers Inc.:

Number of units produced		3,100
Number of units sold		2,500
Unit sales price	$	345
Direct materials per unit	$	50
Direct labor per unit	$	45
Variable manufacturing overhead per unit	$	11
Fixed manufacturing overhead per unit ($232,500/3,100 units)	$	75
Total variable selling expenses ($13 per unit sold)	$	32,500
Total fixed general and administrative expenses	$	58,000

Required:

Prepare Crystal Cold’s full absorption costing income statement and variable costing income statement for the year.

• Full Absorption Costing
• Variable Costing

Prepare Crystal Cold’s full absorption costing income statement for the year.

	CRYSTAL COLD COOLERS INC. Full Absorption Costing Income Statement Less: Cost of Goods Sold Gross Margin Less: Non-Manufacturing Expenses Net Operating Income

• Variable Costing

Prepare variable costing income statement for the year.

	CRYSTAL COLD COOLERS INC. Variable Costing Income Statement Less: variable cost of goods sold Contribution Margin Less: Fixed Costs Net Operating Income

Answer 1

Computation of cost per unit
Particulars			Absorption	Variable
Direct Materials per unit			$   50.00	$   50.00
Direct Labor per unit			$   45.00	$   45.00
Variable manufacturing OH per unit			$   11.00	$   11.00
Fixed manufacturing OH per unit			$   75.00	$          -
			$ 181.00	$ 106.00

	Absorption costing income statement
	Sales				$ 8,62,500.00	(2500 x $ 345)
Less:	Cost of Goods sold				$ 4,52,500.00	(2500 x $ 181)
	Gross Margin				$ 4,10,000.00
Less:	Non- Manufacturing Expenses:
	Variable selling expenses				$    32,500.00	(2500 x $ 13)
	Fixed general and administrative expenses				$    58,000.00
	Total Non- Manufacturing Expenses				$    90,500.00
	Net Operating Income				$ 3,19,500.00

	Variable Costing income statement
	Sales				$ 8,62,500.00	(2500 x $ 345)
Less:	Variable Cost of Goods sold				$ 2,65,000.00	(2500 x $ 106)
Less:	Variable Non- Manufacturing Expense				$    32,500.00	(2500 x $ 13)
	Contribution Margin				$ 5,65,000.00
Less:	Fixed Expenses:
	Fixed Manufacturing Expense				$ 2,32,500.00
	Fixed general and administrative expenses				$    58,000.00
	Total Fixed Expenses				$ 2,90,500.00
	Net Operating Income				$ 2,74,500.00