Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 bikes were produced and 225 were sold; this left 150 bikes in ending inventory. The income statement information under variable costing follows.     Sales (225 × $1,600)$360,000 Variable product cost (225 × $625) 140,625 Variable selling and administrative expenses (225 × $65) 14,625 Contribution margin 204,750 Fixed overhead cost 56,250 Fixed selling and administrative expense 75,000 Net income$73,500    1. Prepare this company's income statement for its first month of operations under absorption costing.

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Asked Apr 8, 2019
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Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 bikes were produced and 225 were sold; this left 150 bikes in ending inventory. The income statement information under variable costing follows.
 

       
Sales (225 × $1,600) $ 360,000  
Variable product cost (225 × $625)   140,625  
Variable selling and administrative expenses (225 × $65)   14,625  
Contribution margin   204,750  
Fixed overhead cost   56,250  
Fixed selling and administrative expense   75,000  
Net income $ 73,500  
 

  
1.
Prepare this company's income statement for its first month of operations under absorption costing.
 

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Expert Answer

Step 1

Compute the unit cost of production.

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Step 2

Prepare the income statement under t...

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