Gia\'s Foods produces frozen meals that it sells for $8 each. The company comput

Question

Gia's Foods produces frozen meals that it sells for $8 each. The company computes a new monthly fixed manufacturing overhead allocation rate based on the planned number of meals to be produced that month. Assume all costs and production levels are exactly as planned. The following data are from Gia's Foods' first month in business: January 2016 Units produced and sold Sales 950 meals Production 1,150 meals Variable manufacturing cost per meals 4 Sales commission cost per meal Total fixed manufacturing overhead 690 Total fixed selling and administrative costs 700 Reguirements Prepare income statements for January 2016 using a.Absorption costing

Explanation / Answer

Income statement :

Sales (950*8) 7600 Less: Cost of goods sold Variable manufacturing cost (950*4) 3800 Fixed manufacturing overhead (690/1150*950) 570 Total Cost of goods sold 4370 Gross profit 3230 Less: Variable selling and administrative expense 950 Less: Fixed selling and administrative expense 700 Total Selling and administrative expense 1650 Net operating income 1580

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