Music World produces student-grade violins for beginning violin students. The co

Question

Music World produces student-grade violins for beginning violin students. The company produced 2,500 violins in its first month of operations. At month-end, 700 finished violins remained unsold. There was no inventory in work in process. Violins were sold for $117.50 each. Total costs from the month are as follows: ?(Clickontrepares traditional(absoptionoosing)inconne The company prepares traditional (absorption costing) income statements for its bankers. Music World would also like to prepare contribution margin income statements for management use. Read the requirements

Explanation / Answer

Hi, tabel of cost component not given in question. However solved without cost figures with all the formulas. If you have cost figure, you can easily put in belwo formulas and you will get ans wer. for clarification, please put your query in comment, will get back to you:

1. Gross Profit Sales Revenue - Cost of goods sold = Gross Profit (2500-700)*117.5 - Direct Material+Direct Labor+Variable OVH+Fixed OVH = 2. Contribution Margin Sales Revenue - Variable Expense = Contribution Margin (2500-700)*117.5 - Direct Material+Direct Labor+Variable OVH+Variable SnD = Contribution Margin 3. Expense shown below the gross profit line Variable Selling and Administrative Expense Fixed Selling and Administrative Expense Total Expense below Gross Profit Line 4. Expense shown below contribution margin line Fixed Manufacturing Overhead Fixed Selling and Administrative Expense Total Expense below contribution margin Line 5. Dollar value of ending inventory value under absorption costing Inventory 700 to be multiplied with per unit Material+Labor+Var OVH+Fixed OVH 6. Dollar value of ending inventory value under Variable costing Inventory 700 to be multiplied with per unit Material+Labor+Var OVH 6. Absorption Costing will give higher operating income

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