Asian Windows manufactures a hand-painted bamboo window shade for standard-size
ID: 2408419 • Letter: A
Question
Asian Windows manufactures a hand-painted bamboo window shade for standard-size windows. Production and sales data for 2016 are as follows: Variable manufacturing costs Fixed manufacturing costs Variable selling and administrative expenses Fixed selling and administrative expenses Selling price Units produced Units sold $40 per shade $9 per shade $90 per shade $107,000 $250,500 10,700 shades 8,340 shades Prepare an income statement using absorption costing ASIAN WINDOWS Income Statement For the Year Ended December 31, 2016 Absorption CostingExplanation / Answer
Asian Windows
Income statement using absorption costing system:
Asian Windows
Income Statement
for the year ended December 31, 2016
Absorption Costing
Sales
$750,600
Less: Cost of goods sold
$417,000
Gross margin
$333,600
Less: Selling and administrative expenses:
$325,560
variable
$75,060
Fixed
$250,500
$325,560
Net Income
$8,040
Working:
Cost of goods sold:
variable manufacturing cost per share
$40
fixed manufacturing costs
$107,000
number of units produced
10,700
fixed manufacturing cost per unit
107,000/10,700 = $10 per share
cost of goods sold = variable manufacturing cost + fixed manufacturing cost
COGS
$40 + $10
$50
total manufacturing cost
10,700 x $50
$535,000
less: cost of finished goods
2,360
$118,000
Cost of goods sold
$417,000
Variable selling and administrative expenses = $9 x 8,340 = $75,060
Income statement using variable costing method:
Asian Windows
Income Statement
for the year ended December 31, 2016
Variable Costing
Sales
$750,600
Less: Variable costs
manufacturing costs
$333,600
selling and administrative costs
$75,060
Total variable cost
$408,660
Contribution margin
$341,940
Less: Fixed cost
manufacturing costs
$107,000
selling and administrative costs
$250,500
total fixed cost
$357,500
Net Income
($15,560)
Number of units sold = 8,340
Variable manufacturing cost = $40 x 8,340 = $333,600
Variable selling and administrative cost = $9 x 8,340 = $83,400
Reconciliation of net income under variable costing and absorption costing methods:
Net Income as per variable costing method
($15,560)
Add: fixed manufacturing overhead deferred
$23,600
Net Income as per absorption costing method
$8,040
Asian Windows
Income Statement
for the year ended December 31, 2016
Absorption Costing
Sales
$750,600
Less: Cost of goods sold
$417,000
Gross margin
$333,600
Less: Selling and administrative expenses:
$325,560
variable
$75,060
Fixed
$250,500
$325,560
Net Income
$8,040
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.