Required Informatlon [The following Information applies to the questions display

Question

Required Informatlon [The following Information applies to the questions displayed below. Oak Mart, a producer of solid oak tables, reports the following data from Its second year of buslness. sales price per unit Units produced this year Units sold this year Units in beginning-year inventory Beginning inventory costs 310 per unit 11e,eee units 113,25e units 3,25e units ariable (3,250 units x $140) Fixed (3,25e units $75) Total $ 455,eee 243,75e $ 698,750 Manufacturing costs this year Direct materials Direct labor Overhead costs this year 42 per unit 68 per unit Variable overhead Fixed overhead $3,2ee,eee $7,0ee,eee selling and administrative costs this year Variable Fixed $1,300,e0e 4,220,eee

Explanation / Answer

a. Oak Mart company Variable Costing Income Statement Sales(1,13,250 X $310) $ 3,51,07,500 Less: Variable Cost Beginning Inventory Variable cost $       4,55,000 Add: Manufacturing cost this year Direct Material (1,10,000 X $42) $     46,20,000 Direct Labour (1,10,000 X $68) $     74,80,000 Variable overhead cost $     32,00,000 Total variable cost available $ 1,57,55,000 Less: Ending finished goods Inventory $                    -   Variable Cost of goods sold $ 1,57,55,000 Add: Variable selling and administrative expenses $     13,00,000 Total variable cost $ 1,70,55,000 Contribution margin $ 1,80,52,500 Less: Fixed Expenses: Fixed overhead cost $     70,00,000 Fixed Selling and Administrative expenses $     42,00,000 Total Fixed expenses $ 1,12,00,000 Net Income $     68,52,500 b. Oak Mart company Absorbtion Costing Income Statement Sales(1,13,250 X $310) $ 3,51,07,500 Less: Cost of Goods Sold Beginning Inventory $       6,98,750 Manufacturing cost this year Direct Material (1,10,000 X $42) $     46,20,000 Direct Labour (1,10,000 X $68) $     74,80,000 Variable overhead cost $     32,00,000 Fixed overhead cost $     70,00,000 Less: Ending Inventory $                    -   Cost of Goods Sold $ 2,29,98,750 Gross Margin $ 1,21,08,750 Less: Selling and Administrative expenses Variable selling and administrative expenses $     13,00,000 Fixed Selling and Administrative expenses $     42,00,000 Total Selling and Administrative expenses $     55,00,000 Net Operating Income $     66,08,750 Net income under variable costing is higher than variable income under absorbtion costing by = $       2,43,750 Number of units added or subtracted from the Inventory (1,13,250 - 1,10,000) =                 3,250 Fixed cost per unit = $                   75 Fixed cost added or subtracted from inventory = $       2,43,750

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