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scan0012 - PROBLEM 7-1 B(Continued 3(c When cproduction...

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Unformatted text preview: PROBLEM 7-1 B (Continued) 3' -\__, (c) When cproduction exceeds sales, absorption costing net income will excee variable costing net income by an amount equal to the fixed overhead rate times the number of units in ending inventory. The ending inventory for Jul was 4,000 boats and the fixed overhead i. rate was $3 per boat. he difference in net income is $12,000 ! ($804,000 — $792,000) which equals the 4,000 boats times the $3 fixed a overhead rate per boat. PROBLEM 7-23 (a) ZAKI METAL COMPANY Income Statement For the Year Ended December 31, 2005 Variable Costing Sales (30,000 miles X $80) ........................ $2,400,000 Variable cost of goods sold . Inventory, January 1 ......................... $ - 0 - Variable cost of goods manufactured [40,000 miles X ($80 X .25)] ........ 800,000 Variable cost of goods available . ‘ \“ for sale .............................................. 800,000 Inventory, December 31 ' [10,000 miles X ($80 X .25)] ....... 200,000 (1) Variable cost of goods-sold ............ 600,000 Variable seiling expenses ............... (30,000 miles X $6) ........................ 180,000 780,000 Contribution margin ................................... 1,620,000 Fixed manufacturing overhead .............. 1,200,000 Fixed administrative expenses ............... 200,000 1,400,000 Net income .................................................... § 220,000 (1) 10,000 miles X ($80 X .25) " 7-34 ...
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