On January 1 of the current year, Townsend Co. commenced operations. It operated
ID: 2535533 • Letter: O
Question
On January 1 of the current year, Townsend Co. commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:
a. Prepare an income statement using absorption costing.
b. Prepare an income statement using variable costing.
Previous
Units Production 50,000 Sales ($18 per unit) 42,000 Inventory, January 31 8,000 Manufacturing costs: Variable $575,000 Fixed 80,000 Total $655,000 Selling and administrative expenses: Variable $35,000 Fixed 10,500 Total $45,500Explanation / Answer
Answers
Manufacturing cost per unit for cost of goods sold calculation = 655000 / 50000 = $13.1 per unit
Townsend Co.
Absorption Costing Income Statement
For Month Ended January 31, 20--
Sales [42000 x $18]
$ 7,56,000.00
Cost of goods sold:
Cost of units produced [50000 x $13.1]
$ 6,55,000.00
Less: Cost of ending Inventory [8000 x $13.1]
$ (1,04,800.00)
Cost of Goods Sold
$ 5,50,200.00
Gross Profits
$ 2,05,800.00
Total Selling & Admin expense
$ 45,500.00
Income from operations
$ 1,60,300.00
Townsend Co.
Variable Costing Income Statement
For Month Ended January 31, 20--
Sales [42000 x $18]
$ 7,56,000.00
Variable cost of goods sold:
Variable manufacturing cost
$ 5,75,000.00
Variable selling & admin cost
$ 35,000.00
Total variable cost
$ 6,10,000.00
Contribution Margin
$ 1,46,000.00
Fixed costs:
Fixed manufacturing cost
$ 80,000.00
Fixed selling & admin cost
$ 10,500.00
Total fixed cost
$ 90,500.00
Income from operations
$ 55,500.00
Townsend Co.
Absorption Costing Income Statement
For Month Ended January 31, 20--
Sales [42000 x $18]
$ 7,56,000.00
Cost of goods sold:
Cost of units produced [50000 x $13.1]
$ 6,55,000.00
Less: Cost of ending Inventory [8000 x $13.1]
$ (1,04,800.00)
Cost of Goods Sold
$ 5,50,200.00
Gross Profits
$ 2,05,800.00
Total Selling & Admin expense
$ 45,500.00
Income from operations
$ 1,60,300.00
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.