BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

Solutions

Chapter
Section
BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Appendix

Absorption costing income statement

On June 30, the end of the first month of operations, Tudor Manufacturing Co. prepared the following income statement, based on the variable existing concept:

Sales (420,000 units) $7,450,000
Variable cost of goods sold:
Variable cost of goods manufactured (500,000 units x $14 per unit) $7,000,000
Less ending inventory (80,000 units x $14 per unit) 1,120,000
Variable cost of goods sold 5,880,000
Manufacturing margin $1,570,000
Variable selling and administrative expenses 80,000
Contribution margin $1,490,000
Fixed costs:
Fixed manufacturing costs $ 160,000
Fixed selling and administrative expenses 75,000 235,000
Income from operations $1,255,000
  • a. Prepare an absorption costing income statement.
  • b. Reconcile the variable costing income from operations of $1,255,000 with the absorption costing income from operations determined in (a).

a.

To determine

Absorption costing financial statement: It is a financial statement that is prepared to provide financial information to the external users as per generally accepted accounting principles. It includes direct materials, direct labor, and both variable and fixed manufacturing/factory overhead.

To prepare: a absorption costing income statement.

Explanation

Prepare a absorption costing income statement.

Absorption Costing Income Statement
T  Manufacturing Company
For the year ended 30 June, 20XX
Particulars Amount ($) Amount ($)
Sales 7,450,000
Less: Cost of goods sold:
            Cost of goods manufactured 7,160,000 (1)
Less:   Ending inventory (1,145,600) (3)
Less: Cost of goods sold (6,014,400)
Gross Profit 1,435,600
Less: Selling and administration expenses (155,000) (4)
Income from operations 1,280,600

Table (1)

Working notes:

Determine the cost of goods manufactured.

Variable cost of goods manufactured =$7,000,000

Fixed manufacturing costs =$160,000

 Costofgoodsmanufactured]=(Variablecostofgoodsmanufactured)+(Fixedmanufacturingcosts)=$7,000,000+$160,000=$7,160,000 (1)

Determine the ending inventory per unit.

Cost of goods manufactured =$7,160,000 (1)

Number of units manufactured = 500,000 units

 Endinginventoryperunit]=CostofgoodsmanufacturedUnitsmanufactured=$7,160,000500,000units=$14

b.

To determine

To reconcile: the variable costing income from operations with the absorption costing income statement.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the four most common bases for departmentalization?

Foundations of Business (MindTap Course List)

Why do options typically sell at prices higher than their exercise values?

Fundamentals of Financial Management (MindTap Course List)

EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 5% and the market risk premium is 6%. W...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Define Web Services.

Pkg Acc Infor Systems MS VISIO CD