Question

On October 31, the end of the first month of operations, Maryville Equipment Company prepared the following income statement, based on the variable costing concept:

Maryville Equipment Company Variable Costing Income Statement For the Month Ended October 31
Sales (8,500 units)			$510,000
Variable cost of goods sold:
Variable cost of goods manufactured	$261,600
Inventory, October 31 (2,400 units)	(57,600)
Total variable cost of goods sold			(204,000)
Manufacturing margin			$306,000
Variable selling and administrative expenses			(136,000)
Contribution margin			$170,000
Fixed costs:
Fixed manufacturing costs	$54,500
Fixed selling and administrative expenses	34,000
Total fixed costs			(88,500)
Operating income			$81,500

Prepare an income statement under absorption costing. Round all final answers to whole dollars.

Maryville Equipment Company
Absorption Costing Income Statement
For the Month Ended October 31
		$
Cost of goods sold:
	$
		$
		$

Answer 1

Answer-

MARYVILLE EQUIPMENT COMPANY
Income statement (using Absorption costing )
Particulars			Amount
			$
Sales (a)	8500 units*$60 per unit		510000
Less:- Cost of goods sold (b)
Opening inventory
Add:-Cost of goods manufactured	10900 units*$29 per unit	316100
Cost of goods available for sale		316100
Less:- Closing inventory	2400 units*$29 per unit	69600	246500
Gross profit C= a-b			263500
Less:- Operating Expenses
Fixed selling & Administrative expenses			34000
Variable Selling & administrative exp.	8500 units*$16 per unit		136000
Net Operating Income			93500

Explanation- Cost of goods manufactured per unit (Absorption Costing)= (Cost of goods manufactured under variable costing+ Fixed manufacturing overhead)/No. of units produced

= ($261600+$54500)/10900 units

= $29 per unit

Closing inventory under absorption costing = 2400 units*$29 per unit

= $69600