Fixed labor, week 3

Fixed labor, week 3 - Contribution margin 392,000 Fixed...

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Fixed labor 1. A. Absorption Costing Direct materials $86. Variable manufacturing overhead 4 Total variable manufacturing cost 90 Fixed manufacturing overhead (240,000/4,000) = 60 Unit product cost 150 B. Variable costing Direct materials $86. Variable manufacturing overhead 4 Unit product cost 90 2. Income statement using absorption costing Sales (3,200 units X $250 per unit) 800,000 Cost of goods sold: Cost of goods manufactured (4,000 X90) 360,000 Less ending inventory (800 X90) 72,000 Cost of goods sold 288,000
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Gross profit 512,000 Selling and administrative expenses 160,000 Income from operations $352,000 3. Variable costing income statement Sales (3,200 X $250) 800,000 Variable cost of goods sold: Variable cost of goods manufactured (4,000 X 90) 360,000 Less ending cost of goods sold (800 X 90) 72,000 Variable cost of goods sold 288,000 Manufacturing margin $512,000 Variable selling and administrative expenses 120,000
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Unformatted text preview: Contribution margin 392,000 Fixed costs: Fixed manufacturing costs 240,000 Fixed selling and administrative expenses 160,000 400,000 Income from operations 8,000 4. I would prefer to take the absorption costing income statement to the bank to negotiate for a bank loan because the variable costing income statement shows a negative balance whereas, the absorption statement shows a profit for the company. Reconciliation of Net Operating Income Net Income under Contribution Format ($ 8,000) Add Fixed Manufacturing Overhead deferred in Inventory ($60*800) $48,000 Absorption Cost Net Operating Income $40,000 5. Variable costing net operating income (loss) $ (8,000) Add: Fixed manufacturing overhead cost deferred in inventory under absorption costing (800 units $60 per unit) 48,000 Absorption costing net operating income $40,000...
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Fixed labor, week 3 - Contribution margin 392,000 Fixed...

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