Assume the following data concerning the operation of the Ames Manufacturing Com

Question

Assume the following data concerning the operation of the Ames Manufacturing Company

Number of units sold: 100 units

Selling price per unit: $ 20

Variable manufacturing cost/unit: $ 5

Fixed manufacturing costs: $ 300

Variable selling and administrative cost/unit: $ 4

Fixed selling and administrative costs: $110

Prepare an income statement for the month of September, using the absorption costing (traditional) and direct costing (variable) formats.

*Please explain each statement and how you got it. for ex: Sales (20 x 100= 2000)

Explanation / Answer

Hi,

Please find the detailed answer as follows:

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Notes:

Since there is no opening stock and closing stock of inventory, there will no difference in the final figure of net operating income.

Thanks.

Absorbtion Costing Income Statement Sales (100*20) 2000 Less Cost of Goods Sold Variable Manufacturing Cost (100*5) 500 Fixed Manufacturing Costs 300 Gross Profit 1200 Less Marketing and Administrative Expenses Variable Selling and Administrative Cost (100*4) 400 Fixed Selling and Administrative Cost 110 Net Operating Income 690

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