Question

Number of units produced 3,100 Number of units sold 2,400 Unit sales price $ 350 Direct materials per unit $ 60 Direct labor per unit $ 50 Variable manufacturing overhead per unit $ 11 Fixed manufacturing overhead per unit ($232,500/3,100 units) $ 75 Total variable selling expenses ($14 per unit sold) $ 33,600 Total fixed general and administrative expenses $ 64,000 Required: Prepare Crystal Cold’s full absorption costing income statement and variable costing income statement for the year.

Answer 1

See explanation section.

Step-by-step explanation:

Requirement 1

Crystal Cold’s

Absorption Costing Income Statement

For the year ending, December 20YY

Sales revenue ($2,400 units × $ 350) = $840,000

Less: Cost of goods sold

Direct materials ($2,400 units × 60) = $144,000

Direct labor ($2,400 units × 50) = $120,000

Variable manufacturing overhead ($2,400 units × 11) = $26,400

Fixed manufacturing overhead = $232,500

Total cost of goods sold = $522,900

Gross profit = $317,100

Less: Selling, General & Administrative expenses

Variable SG&A = $33,600

Fixed SG&A = $64,000

Total SG&A = $97,600

Net Income = $219,500

Requirement 2

Crystal Cold’s

Variable Costing Income Statement

For the year ending, December 20YY

Sales revenue ($2,400 units × $ 350) = $840,000

Less: Variable product cost

Direct materials ($2,400 units × 60) = $144,000

Direct labor ($2,400 units × 50) = $120,000

Variable manufacturing overhead ($2,400 units × 11) = $26,400

Variable selling expense $33,600

Total variable expenses = $324,000

Contribution margin = $516,000

Less: Fixed expenses

Fixed manufacturing overhead = $232,500

Fixed selling expense = $64,000

Total fixed expense = $296,500

Net Income = $219,500