On January 1 of the current year, C. F. Hartley Co. commenced operations. It ope

Question

On January 1 of the current year, C. F. Hartley Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:

Units
Production 50,000
Sales ($18 per unit) 42,000
Inventory, January 31 8,000
======

Total Cost or Expense
Manufacturing costs:
Variable $575,000
Fixed 75,000
Total $650,000
========
Selling and administrative expenses:
Variable $ 33,600
Fixed 10,500
Total $ 45,500
========

(a) Prepare an income statement in accordance with absorption costing.
(b) Prepare an income statement in accordance with variable costing.

Explanation / Answer

Hi,

Please find the answers as follows:

Absorbtion Sales 756000 Cost of Goods Sold 546000 Gross Profit 210000 Period Costs
Variable Selling Expenses 33600 Fixed Selling Expenses 10500 Income from Operations 165900

Variable Sales 756000 Variable Cost of Goods Sold 546000 Variable Selling Expenses 33600 Contribution Margin 239400 Fixed Selling Expenses 10500 Fixed Factory Overheads 75000
153900

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