Question

Sales $2,150,000 Manufacturing costs: Direct materials $960,000 Direct labor 420,000 Variable manufacturing cost 156,000 Fixed manufacturing cost 288,000 1,824,000 Selling and administrative expenses: Variable $204,000 Fixed 96,000 300,000 Required: 1. Prepare an income statement based on the absorption costing concept.

Answer 1

Net income 26,000

Step-by-step explanation:

Absorption costing classifies costs as production cost and non-production costs ( selling and distibution , administration e.t.c)

Income statement using Absorption costing

$

Sales Revenue 2,150,000

Less cost of goods sold

Direct material 960,000

Direct labour cost 420,000

Variable manufacturing 156,000

Fixed manufacturing 288,000

production cost ( 1,824,000 )

Gross profit 326,000

Selling and distribution

Variable 204,000

Fixed 96,000

(300,000)

Net income 26,000