The following data are available for Scream Company for the year ended December

Question

The following data are available for Scream Company for the year ended December 31, 2015:
Sales 38,000 units
Sales price $50 per unit
Actual variable manufacturing costs $1,400,000
Actual fixed manufacturing costs $228,000
Actual variable nonmanufacturing costs $76,000
Actual fixed nonmanufacturing costs $135,000
Work-in-process inventory, January 1, 2015 0
Finished goods inventory, January 1, 2015 0
Direct materials inventory, January 1, 2015 0
Work-in-process inventory, December 31, 2015 0
Direct material inventory, December 31, 2015 0
Expected production 40,000 units
Actual production 40,000 units
Required:
A) Using the variable-costing approach, prepare an income statement for the year ended December 31,
2015. Assume actual fixed costs were equal to budgeted fixed costs.
B) Using the absorption-costing approach, prepare an income statement for the year ended December 31,
2015. Assume actual fixed costs were equal to budgeted fixed costs.

Explanation / Answer

Income statement based on variable costing Approach Particulars Amount Working Notes Sales    1,900,000.00 38,000*50 Actual Variable Manufacturing costs    1,330,000.00 1,400,000*38,000/40,000 Actual Variable NonManufacturing costs          72,200.00 76,000*38,000/40,000 Contribution(Sales - VC)       497,800.00 Actual Fixed Manufacturing Costs       228,000.00 Actual Fixed Non Manufacturing Costs       135,000.00 Income(Contribution - fixed Costs)       134,800.00 Income statement based on Absorption costing Approach Particulars Amount Working Notes Sales    1,900,000.00 38,000*50 Actual Variable Manufacturing costs    1,330,000.00 1,400,000*38,000/40,000 Actual Variable NonManufacturing costs          72,200.00 76,000*38,000/40,000 Contribution(Sales - VC)       497,800.00 Actual Fixed Manufacturing Costs       216,600.00 228,000*38,000/40,000 Actual Fixed Non Manufacturing Costs       128,250.00 135,000*38,000/40,000 Income(Contribution - fixed Costs)       152,950.00

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