Question

er of tennis rackets. began operations this year. The company produced 6,000 Inc., a a4900. Each racket was sold at a price of $90. Fixed overhead costs are $78.000, and fixed akets and administrative costs are $65.200. The company also reports the following per unit variable so Prepare an income statement under absorption costing. for the year. costs for the year. Variable product costs... Variable selling and administrative expenses. $25.00 2.00 ..

Answer 1

1)

ACES INC. COMPANY
INCOME STATEMENT UNDER ABSORPTION COSTING
FOR THE YEAR ENDED
SALES	4900 UNITS	$90	441,000
LESS:COST OF GOODS SOLD(VARIABLE COST PER UNIT $ 25 & FIXED OVERHEAD COST PER UNIT $13($78000/6000UNITS))	4900 UNITS	$38	186,200
GROSS MARGIN			254,800
LESS:SELLING AND ADMN. COST(4900*2+65200)			75,000
NET INCOME			179,800

2)

RAMORT. COMPANY
INCOME STATEMENT UNDER ABSORPTION COSTING
FOR THE YEAR ENDED
SALES	20,000 UNITS	$60	1,200,000
LESS:COST OF GOODS SOLD
DIRECT MATERIAL	20,000	$10	200,000
DIRECT LABOUR	20,000	$12	240,000
VARIABLE OVERHEAD COST	20,000	$3	60,000
FIXED OVERHEAD COST			40,000
GROSS MARGIN			660,000