Question

The following information was collected for the first year of manufacturing for Appliance Apps:

Direct Materials per Unit $2.25
Direct Labor per Unit $1.50
Variable Manufacturing Overhead per Unit $0.25
Variable Selling and Administration Expenses $1.75
Units Produced 40,000
Units Sold 36,000
Sales Price $12
Fixed Manufacturing Expenses $120,000
Fixed Selling and Administration Expenses $20,000

Required:
Prepare an income statement under variable costing method.

Answer 1

Appliance Apps

Income statement under variable costing method.

Sales ($12 x 36,000) $432,000

Less Variable Cost of Sales ($144,000)

Contribution $288,000

Less Expenses :

Fixed Manufacturing Expenses $120,000

Fixed Selling and Administration Expenses $20,000

Variable Selling and Administration Expenses $63,000 ($203000)

Net Income $85000

Step-by-step explanation:

Total Product Cost (Variable Manufacturing Cost Only)

Direct Materials per Unit $2.25

Direct Labor per Unit $1.50

Variable Manufacturing Overhead per Unit $0.25

Total $4.00

Cost of Sales = Product Cost x Units Sold

= $4.00 x 36,000

= $144,000