Consider the fol Owin infomation for PresidInc s most recent ear or operations d

Question

Consider the fol Owin infomation for PresidInc s most recent ear or operations dit nal information for resido's most recent year of operations follows Number of units produced Number of units solkd Unit sales price Direct materials per unit Direct labor per unit Variable manufacturing overhead per unit 2.300 1.400 $ 730 00 70.00 100.00 50.00 units) Total variable selling expenses ($12 per unit sold) Total fixed general and administrative expenses Fixed manufacturing overhead per unit (5273470-2300 18 so 16,800 00 84,000.00 Required: 2. Complete a fultl absorption costing income statement and a vanable costing income statement for Presidio. Assume there was no beginning inventory Presidio, Inc. Full Absorption Income Statement Less Cost of Goods Sold Gross Margin Net Operating Income

Explanation / Answer

presidio inc's Income statement using variable costing:

amount

$

sales

[1400 units * 730 $ ]

less: direct material

[1400 units * 70 $ ]

less: direct labour

[1400 units * 100 $ ]

less: variable manufacturing overheads

[1400 units * 50 $ ]

less: variable selling overheads

[1400 units * 12 $ ]

less: fixed manufacturing overheads

*( it is taken fixed on units produced)

presidio inc's Income statement using absorption costing :

amount

$

sales

[1400 units * 730 $ ]

less: cost of goods sold

[1400 units * 338.9 $ ]

gross profit

less: selling overheads

[1400 units * 12 $ ]

less: fixed general and administrative overheads

Calculation of cost of goods sold ( per unit):

amount

$

Therefore the difference in profit by using absorption costing and variable costing

= 446,740 $ - 339,730 $

=107,010 $

Particulars

amount

$

sales

[1400 units * 730 $ ]

1,022,000

less: direct material

[1400 units * 70 $ ]

98,000

less: direct labour

[1400 units * 100 $ ]

140,000

less: variable manufacturing overheads

[1400 units * 50 $ ]

70,000

less: variable selling overheads

[1400 units * 12 $ ]

16,800 Contribution 697,200

less: fixed manufacturing overheads

*( it is taken fixed on units produced)

273,470 less: fixed general and administrative overheads 84,000 Net profit 339,730

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