Question

Oak Mart, a producer of solid oak tables, reports the following data from its second year of business. Sales price per unit $ 330 per unit Units produced this year 115,000 units Units sold this year 119,000 units Units in beginning-year inventory 4,000 units Beginning inventory costs Variable (4,000 units × $135) $ 540,000 Fixed (4,000 units × $70) 280,000 Total $ 820,000 Manufacturing costs this year Direct materials $ 42 per unit Direct labor $ 66 per unit Overhead costs this year Variable overhead $ 3,200,000 Fixed overhead $ 7,400,000 Selling and administrative costs this year Variable $ 1,450,000 Fixed 4,200,000 2. Prepare the current-year income statement for the company using absorption costing.

Answer 1

b.	Oak Mart company
	Absorption Costing Income Statement
	Sales(119000 X $330)		$ 3,92,70,000
Less:	Cost of Goods Sold
	Beginning Inventory	$       8,20,000
	Manufacturing cost this year
	Direct Material (1,15,000 X $42)	$     48,30,000
	Direct Labor (1,15,000 X $66)	$     75,90,000
	Variable overhead cost	$     32,00,000
	Fixed overhead cost	$     74,00,000
Less:	Ending Inventory	$                    -
	Cost of Goods Sold		$ 2,38,40,000
	Gross Margin		$ 1,54,30,000
Less:	Selling and Administrative expenses
	Variable selling and administrative expenses	$     14,50,000
	Fixed Selling and Administrative expenses	$     42,00,000
	Total Selling and Administrative expenses		$     56,50,000
	Net Operating Income		$     97,80,000

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