Question

Please help me figure this out. I am stuck.

Elter Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	122
Units in beginning inventory		290
Units produced		6,600
Units sold		6,590
Units in ending inventory		300
Variable costs per unit:
Direct materials	$	42
Direct labor	$	26
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	21
Fixed costs:
Fixed manufacturing overhead	$	151,800
Fixed selling and administrative expense	$	46,130

The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month.

Required:

a. Prepare a contribution format income statement for the month using variable costing.

b. Prepare an income statement for the month using absorption costing.

                                     

Variable Costing Income Statement

Sales                                                          803,980

Variable expenses:                                     ?

Variable selling and administrative exp.     ?

Variable cost of goods sold (formula for this)      ???????

Answer 1

Contribution Format income statement
Particulars			Amount	Amount
Sales (6590*122)				803980
less: Variable expenses:
Variable cost of goods sold (6590*70)**			461300
Variable selling & administrative (6590*21)			138390	599690
Contribution margin				204290
less: fixed expenses
Fixed manufacturing overhead			151800
Fixed selling & administrative			46130	197930
Net operating income				6360
**Variable costing unit product cost
Direct material			42
Direct labor			26
Variable manufacturing overhead			2
Unit product cost			70
Income statement for the month using absorption costing
Sales (122*6590)				803980
cost of goods sold (6590*93)				612870
Gross margin				191110
less: selling & administrative expenses
Variable selling & administrative exp (21*6590)			138390
Fixed selling & administrative expenses			46130	184520
Net operating income				6590
Unit product cost under absorption costing
Direct material			42
Direct labor			26
variable maufacturing overhead			2
fixed manufacturing overhead (151800/6600)			23
Unit product cost			93

Please give a thumbs up if it is helpful & let me know if any doubt