Question

During the most recent year, Osterman Company had the following data:Units in beginning inventory ---Units produced 11,600Units sold ($48 per unit) 9,000Variable costs per unit: Direct materials $9Direct labor $7Variable overhead $3Fixed costs: Fixed overhead per unit produced $5Fixed selling and administrative $137,500Required:1. Calculate the cost of goods sold under absorption costing.The cost of goods sold under the absorption costing method is2. Prepare an income statement using absorption costing. Refer to the list of Amount Descriptions for the exact wording of text items within your income statement.

Answer 1

Cost of Good Sold Statement:

Material Cost (9*9000) = 81,000

Labour Cost (7*9000) = 63,000

Variable Overhead Cost (3*9000) = 27,000

Fixed Overhead Cost (5*9000) = 45,000

Total COGS = 216,000 dollars

Income Statement

Sales (9000*48) 432,000

CoGS (216,000)

Gross Profit 216,000

Selling and Admin (137,500)

Net profit 78,500 Dollars

Note

Absorption costing, sometimes called full absorption costing, is a managerial accounting method for capturing all costs associated with manufacturing a particular product. So selling and admin costs are not part of it.