Question 33 During 2016, Rafael Corp. produced 39,120 units and sold 39,120 for

Question

Question 33

During 2016, Rafael Corp. produced 39,120 units and sold 39,120 for $16 per unit. Suppose the accountant for Rafael Corp. uses normal costing and uses the budgeted volume of 48,900 units. Variable manufacturing costs were $6 per unit. Annual fixed manufacturing overhead was $78,240 ($2 per unit). Variable selling and administrative costs were $2 per unit sold, and fixed selling and administrative expenses were $19,400. The company expenses production volume variance to cost of goods sold in the accounting period in which it occurs.

Prepare a normal-costing income statement for the first year of operation.

Explanation / Answer

Rafael Corp. Normal-Costing income statement $ $ Sales Revenue ( 39,120 units x $ 16 ) - ( A )              625,920 Less: Cost of goods sold; Variable manufacturing costs (39,120 units x $ 6 )           234,720 Fixed manufacturing overhead ( 48,900 units x $ 2 )             97,800 Total cost of goods manufactured           332,520 Less: Ending inventory cost                      -   Cost of goods sold ( Gross )           332,520 Less: Overapplied fixed manufacturing overhead ( $ 97,800 - $ 78,240 )           (19,560) Cost of goods sold ( Net ) - ( B )              312,960 Gross income ( C) =( A ) - ( B )              312,960 Operating expenses; Variable selling and administrative costs ( 39,120 units x $ 2 )             78,240 Fixed selling and administrative costs             19,400 Total operating costs ( D )                97,640 Net income ( C ) - ( D )              215,320

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