Consider the following information for Presidio Inc.\'s most recent year of oper

Question

Consider the following information for Presidio Inc.'s most recent year of operations. Additional information for Presidio's most recent year of operations follows: Number of units produced Number of units sold Unit sales price Direct materials per unit Direct labor per unit Variable manufacturing overhead per unit 2,300 1,400 S 730.00 70.00 100.00 50.00 Fixed manufacturing overhead per unit ($273,470 +2.300 11890 units) Total variable selling expenses ($12 per unit sold) Total fixed general and administrative expenses 16,800.00 84,000.00 Required: Complete a full absorption costing income statement and a variable costing income statement for Presidio. Assume there was no Presidio, Inc Full Absorption Income Statement Less: Cost of Goods Sold Gross Margin Net Operating Income

Explanation / Answer

1) ABSORPTION COSTING INCOME STATEMENT : SALES (1400 X $730) $1,022,000 LESS : COST OF GOODS SOLD DIRECT MATERIAL (1400X$70) $98,000 DIRECT LABOUR (1400*100) $140,000 VARIABLE MANUFACTURING OVERHEAD (1400*50) $70,000 FIXED MANUFACTURING OVERHEAD (1400*118.90) $166,460 -$474,460 GROSS PROFIT $547,540 LESS : FIXED GENERAL AND ADMINISTRATIVE EXP -$84,000 LESS : VARIABLE SELLING EXP ($12x 1400) -$16,800 NET OPERATING INCOME $446,740 2) VARIABLE COSTING INCOME STATEMENT : SALES (1400 X $730) $1,022,000 Less : Variable cost DIRECT MATERIAL (1400X$70) $98,000 DIRECT LABOUR (1400*100) $140,000 VARIABLE MANUFACTURING OVERHEAD (1400*50) $70,000 VARIABLE SELLING EXP ($12x 1400) $16,800 -$324,800 CONTRIBUTION MARGIN $697,200 LESS: FIXED EXPENSE FIXED MANUFACTURING OVERHEAD $273,470 FIXED GENERAL AND ADMINISTRATIVE EXP 84000 -$357,470 Net operating Income $339,730 3) Difference in profit (446740-339730) = $107010

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