Hayek Bikes prepares the income statement under variable costing for its manager

Question

Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 375 bikes were produced and 225 were sold; this left 150 bikes in ending inventory. The income statement information under variable costing follows.
  

1. Prepare this company's income statement for its first month of operations under absorption costing. (Round your intermediate calculations to the nearest whole dollar.)

*Please advise that under 'Number of units added (subtracted from inventory), there is another box where another amount is before getting the final answer to fixed costs added to inventory.

Sales (225 × $1,625) $ 365,625 Variable product cost (225 × $675) 151,875 Variable selling and administrative expenses (225 × $60) 13,500 Contribution margin 200,250 Fixed overhead cost 71,250 Fixed selling and administrative expense 80,000 Net income $ 49,000

Explanation / Answer

Income statement Sales revenue 365625 cost of goods sold Beginning inventory 0 cost of goods manufactured 324375 (865*375) Add Goods available for sale 324375 Ending inventory 129750 (865*150) Less Cost of goods sold 194625 Gross profit 171000 Selling and admin expenses Less Variable marketing and admin expense 13500 (60*225) Fixed marketing and selling expense 80000 Total Selling and admin expenses 93500 Net operating income 77500 Net operating income variable costing 49000 Add Ending inventory Fixed manufacturing 28500 (190*150) Net operating income absorption costing 77500 Number of units added 150 Fixed cost per unit 190 Total fixed cost added 28500

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