Sales 450000 Less variable cost of goods sold Beginning inventory Variable cost

# Sales 450000 less variable cost of goods sold

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Sales 450,000 Less variable cost of goods sold Beginning inventory 0 Variable cost of goods manufactured 280,000 c) Prepare an absorption costing income statement. Sales 450,000 Less cost of goods sold Beginning inventory 0 cost of goods manufactured 320,000 Costs of goods available for sale 130,000 Closing inventory 80,000 50,000 Gross profit 400,000 Less selling and administrative expenses Variable expenses 60,000 Fixed expenses 70,000 130,000 Net operating income 270,000 Problem 12
Momentum Bikes manufactures a basic road bicycle. Production and sales data for the most recent year are as follows (no beginning inventory): Variable production costs \$85 per bike Fixed production costs \$530,000 Variable selling & administrative costs \$17 per bike Fixed selling & administrative costs \$480,000 Selling price \$195 per bike Production 21,200 bikes Sales 19,000 bikes Instructions a.Prepare a brief income statement using absorption costing. Sales(19,000x 195) 3,705,000 Less: cost of goods sold(19,000 x 110) 2,090,000 Gross profit 1,615,000 Less: selling and administrative costs(19,000 x 17 + 480,000) 803,000 Net income 812,000 Variable production cost 85 per bike Fixed production costs (530,000/21,200) 25 per bike Total cost of goods sold per bike 110 per bike b.Calculate the amount to be reported for inventory in the year end absorption costing balance sheet. (21,200 - 19,000 x 115) 253,000 c.Prepare a brief income statement using variable costing. Sales (19,000 x 195) 3,705,000 Less: variable cost Variable cost of goods sold (19,000 x 85) 1,615,000 Variable selling and administrative costs(19,000 x 17) 323,000 1,938,000 Contribution margin 1,767,000 Less: fixed costs Fixed production costs 530,000 Fixed selling and administrative costs 480,000 1,010,000 Net income 757,000
d.Calculate the amount to be reported for inventory in the year end variable costing balance sheet. ( 21,200 - 19,000 x 85 ) 187,000 Problem 13 Conan Company produces sporting equipment. In 2011, the first year of operations, Conan produced 25,000 units and sold 18,000 units. In 2012, the production and sales results were exactly reversed. In each year, selling price was \$100, variable manufacturing costs were \$40 per unit, variable selling expenses were \$8 per unit, fixed manufacturing costs were \$540,000, and fixed administrative expenses were \$200,000. Instructions a. Prepare an income statement for 2011 using variable costing Sales (18,000 x 100) 1,800,000 Less: variable cost Variable cost of goods sold (18,000 x 40) 720,000 Variable selling and administrative costs(18,000 x 8) 144,000 864,000 Contribution margin 576,000 Less: fixed costs Fixed production costs 540,000 Fixed selling and administrative costs 200,000 740,000 Net income 196,000 b. Prepare an income statement for 2011 using absorption costing. Sales(18,000x 100) 1,800,000 Less: cost of goods sold(18,000 x 42.60) 766,800 Gross profit 1,033,200 Less: selling and administrative costs(18,000 x 8 + 200,000) 344,000 Net income 689,200 Variable production cost 40 per unit Fixed production costs (540,000/250,000) 2.16 per unit Total cost of goods sold per unit 42.16 per unit c. Reconcile the differences each year in income from operations under the two costing approaches with reference to fixed costs.
Net income = 689,200-196,000 = 493,200 Therefore, the differences in each year of income from operations under the two costing approaches is \$493,200.

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