Question

Gig Harbor Boating is the wholesale distributor of a small recreational catamaran sailboat. Management has prepared the following summary data to use in its annual budgeting process:

Budgeted unit sales 480
Selling price per unit $1,960
Cost per unit $1,350
Variable selling and administrative expenses (per unit) $40
Fixed selling and administrative expenses (per year) $225,000
Interest expense for the year $12,000
Required:
Prepare the company’s budgeted income statement using an absorption income statement format.

Answer 1

income statement using an absorption income statement format.

Sales ( 480 × $1,960) 940,800

Less Cost of Sales ( 480×$1,350) (648,000)

Gross Profit 292,800

Less Operating Expenses

Variable selling and administrative expenses (480×$40) (19,200)

Fixed selling and administrative expenses $225,000 (225,000)

Interest Expense ($12,000)

Net Income $36,600

Step-by-step explanation:

Absorption Costing Considers BOTH variable and fixed costs in product cost.Non-Manufacturing are treated as period costs.