The following data are from the accounting records of Niles Castings for year 2:

Question

The following data are from the accounting records of Niles Castings for year 2: Units produced and sold Total revenues and costs 88,000 Sales revenue Direct materials costs Direct labor costs Variable manufacturing overhead Fixed manufacturing overhead Variable marketing and administrative costs Fixed marketing and administrative costs 340,000 66,000 31,000 10,000 49,000 15,000 35,000 Required a. Prepare a gross margin income statement. Gross Margin Income Sales revenue Variable manufacturing costs Fixed manufacturing overhead costs Gross margin Fixed marketing and administrative costs Variable marketing and administrative costs Operating profit b. Prepare a contribution margin income statement. Contribution Margin Income Statement Sales revenue Variable marketing and administrative costs Variable manufacturing costs Contribution margin Fixed marketing and administrative costs Fixed manufacturing costs profit

Explanation / Answer

a) Gross margin income statement :

b) Contribution margin income statement :

Sales revenue 340000 Variable manufacturing costs (66000+31000+10000) 107000 Fixed manufacturing costs 49000 Gross margin 184000 Variable marketing and administrative costs 15000 Fixed marketing and administrative costs 35000 Operating profits 134000

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