Variable and Absorption Costing-Service Company Jensen\'s Tailoring provides cus

Question

Variable and Absorption Costing-Service Company Jensen's Tailoring provides custom tailoring services. After the company's first year of operations, its owner prepared the following summarized data report for 2016: Sales (500 completed jobs) Tailoring costs (550 jobs) Direct labor Manufacturing overhead $100,000 47,000 Variable 12,000 Fixed 9,000 Operating expenses Variable 5,600 Fixed 5,800 a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.

Explanation / Answer

Answer

Sales

100000

Cost of Goods Sold:

Beginning Inventory

0

Direct Labor

47000

manufacturing Overhead

21000

Less: Ending Inventory

[(47000+21000)x50/550] 6182

Cost of Goods Sold

61818

Gross Profits

$38182

Operating expenses

11400

Net Income (loss)

$26782

Sales

$100000

Variable cost of goods sold

Beginning Inventory

0

Direct labor

47000

Variable manufacturing overhead

12000

Less: Ending Inventory

5364

Variable cost of goods sold

53636

Variable operating expenses

5091

Contribution margin

$41273

Fixed Cost:

Manufacturing Overhead

9000

Operating expenses

5800

Total fixed cost

14800

Net Income (Loss)

$26473

Variable Costing income statement will present most relevant data.

Contribution margin [calculated above]-A

41273

Sales [given above]-B

100000

Contribution margin ratio A/B

41.273%

Sales revenue [50 x $150]

$7500

Profit (loss) o special order [7500 x 41.273%]

$3095

Sales

100000

Cost of Goods Sold:

Beginning Inventory

0

Direct Labor

47000

manufacturing Overhead

21000

Less: Ending Inventory

[(47000+21000)x50/550] 6182

Cost of Goods Sold

61818

Gross Profits

$38182

Operating expenses

11400

Net Income (loss)

$26782

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