Santana Rey expects sales of Business Solutions’s line of computer workstation f

Question

Santana Rey expects sales of Business Solutions’s line of computer workstation furniture to equal 300 workstations (at a sales price of $3,700 each) for 2018. The workstations’ manufacturing costs include the following.

The selling expenses related to these workstations follow.

Direct materials $ 770 per unit Direct labor $ 350 per unit Variable overhead $ 60 per unit Fixed overhead $ 19,200 per year Requlrec 1. Complete the following income statements using absorption costing. Production volume 300 320 Cost of goods sold: workstations workstations Cost of goods sold per unit Number of workstations sold Total cost of goods sold BUSINESS SOLUTIONS Absorption Costing Income Statements Production volume 300 320 Sales volume -300 Workstations workstations workstations Under absorption costing, can the difference between production volume and sales volume affect the reported net income (loss)?

Explanation / Answer

Statement Showing Cost Per Unit Particular For 300 Unit For 320 Unit Cost of Direct Material $770 $770 Direct Labour $350 $350 Variable Overhead $60 $60 Fixed Overhead ($19200/300) (19200/320) $64 $60 Total Aborption Cost Per Unit $1,244 $1,240 No. Of Workstation Sold 300 320 Total Cost of Goods Sold $373,200 $396,800 Absorption Costing Income Statement Particular Workstation Workstation 300 320 Sales @$ 3700 $1,110,000 $1,184,000 Less: COGS $373,200 $396,800 Gross Profit $736,800 $787,200 Less: Selling Expense ( Variable +Fixed) $15,800 $16,600 Net Income $721,000 $770,600 Variable Cosing Income Statement Particular Workstation Workstation No. of Unit 300 320 Sales @$ 3700 $1,110,000 $1,184,000 Less: Variable Expense Variable Manufacturing Expense @$1180 $354,000 $377,600 Variable Selling Expense @$40 $12,000 $12,800 Contribution $744,000 $793,600 Less: Fixed Expense Fixed Manufacturing Expense $19,200 $19,200 Fixed Selling Expense $3,800 $3,800 Net Income $721,000 $770,600 Computation of Variable Manufacturing Expense Particular Amount Cost of Direct Material $770 Direct Labour $350 Variable Overhead $60 Total $1,180

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