CompuDesk, Inc., makes an oak desk specially designed for personal computers. Th

Question

CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $205. Data for last year’s operations follow:

Assume that the company uses absorption costing. Prepare an income statement. (Input all amounts as positive values except losses which should be indicated by a minus sign. Round your intermediate calculations and final answers to the nearest dollar amount.)

CompuDesk, Inc., makes an oak desk specially designed for personal computers. The desk sells for $205. Data for last year’s operations follow:

Explanation / Answer

1.

Product cost under absorption costing = Direct materials + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

Fixed manufacturing overhead = $319,300

Units produced = 10,300

Fixed manufacturing overhead per unit = $319,300/10,300 = $31 per unit

Unit product cost = $61 + $33 + $14 + $31 = $139 per unit

2.

Absorption costing income statement

Sales

$205*9,300 units

$ 1,906,500

Cost of goods sold

$139 * 9,300 units

$ 1,292,700

Gross profit

$ 613,800

Selling and administrative expenses

($17*9,300 units) + $505,000

$ 663,100

Net operating loss

-$ 49,300

Absorption costing income statement

Sales

$205*9,300 units

$ 1,906,500

Cost of goods sold

$139 * 9,300 units

$ 1,292,700

Gross profit

$ 613,800

Selling and administrative expenses

($17*9,300 units) + $505,000

$ 663,100

Net operating loss

-$ 49,300

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