Question

Score: 0.64 of 1 pt 4 of 8 (8 complete) HW Score: 73.74%, 442 of 6 pts X E6-61B (similar to) Question Help The annual data that follows pertain to Goggles 4 U, a manufacturer of swimming goggles (the company had no beginning inventory! Click the icon to view the data.) Requirements 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Goggles 4 U for the year 2. Which statement shows the higher operating income? Why? 3. The company marketing vice president believes a new sales promotion that costs $135 000 would increase sales to 220,000 goggles. Should the company go ahead with the promotion? Give your í Data Table -X Sales revenue 8118000 4554000 Less Cost of goods sold Gross pro 3584000 1840000 Less Operating expenses Operating income Sales price Variable manufacturing expense per unit.... Sales commission expense per unit 5 Fixed manufacturing overhead. . $ Foed operating expenses Number of goggles produced Number of googles sold............ 1 000.000 Choose from any list or enter any number in the input fields and then click Check Answer 5 220,000 18.000 parts Check Answer 5 maig 10:58 PM

Answer 1

Absorption Costing Income Statement Sales Revenue Cost of Goods Sold (15 + 1980000/220000) *198000 Gross Profit Less Operating expenses Operating Income 8118000 4752000 3366000 1849000 1517000 8118000 2970000 1584000 Variable Costing Income Statement Sales Revenue Variable Cost of Goods Sold (15)*198000 Variable Selling expense (Sales Commission) Contribution Margin Less Fixed Manufacturing Overhead Operating expenses Operating Income 6534000 1980000 265000 2245000 4289000 Absorption Costing shows higher incme because the Fixed manufacturing overhead have become a part of cost of goods sold and secondly due to presence of fixed manufacturing overhead in calculating ending inventory