Morey Company has just completed its first year of operations. The company\'s ab

Question

Morey Company has just completed its first year of operations. The company's absorption costing income statement for the year appears below Morey Company Income Statement Sales (40,000 units at $43.10 per unit) Cost of goods sold (40,000 units x $23 per unit) $1,724,000 920,000 Gross margin Selling and administrative expenses 804,000 460,000 Net operating income 344,000 The company's selling and administrative expenses consist of $300,000 per year in fixed expenses and $4 per unit sold in variable expenses. The company's $23 per unit product cost given above is computed as follows: Direct materials Direct labor Vari $ 12 4 4 $ 23 able manufacturing overhead Fixed manufacturing overhead ($208,000 52,000 units) Absorption costing unit product cost Required 1. Prepare the company's income statement in the contribution format using variable costing. (Input all amounts as positive values except losses which should be indicated by a minus sign.) Variable Costing Income Statement (Click to select) Variable expenses (Click to select)

Explanation / Answer

1)

456000

2)

Income statement as per variable costing Sales 1724000 Less : Variable cost Direct Materials 480000 Direct Labor 160000 Variable manufacturing overhead 120000 contribution 964000 Less : Fixed cost Selling expenes 300000 Fixed manufacturing expense 208000 Profit

456000

2)

Profit as per variable costing 456000 Add : Fixed cost absorbed as per absorbtion costing 390769.2 Less : Variable costing Fixed expenses 508000 Income 338769.2

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