(20 pts) A company had the following data (in millions) for 2014 Beginning and e

Question

(20 pts) A company had the following data (in millions) for 2014 Beginning and ending inventory Sales Direct materials used Direct labor Indirect manufacturing costs: 3. None $1250 450 250 200 100 Variable Fixed Variable Manufacturing cost of goods sold Manufacturing cost of goods sold Selling and Administrative expenses 105 Variable Fixed Gross profit Contribution margin Prepare an income statement using: aj the contribution approach b) the absorption approach and as you do it, fill in the blanks where applicable

Explanation / Answer

Contribution approach Amount Amount Sales 1250 Less: Variable costs Direct materials 450 Direct labor 250 Indirect variable costs 200 Variable selling and adm costs 105 Total variable cost 1005 Contribution margin 245 Less: Fixed costs Fixed manufacturing costs 100 Fixed selling and adm costs 90 Total fixed costs 190 Net profit 55 Absorption approach Amount Amount Sales 1250 Direct materials 450 Direct labor 250 Indirect manufacturing variable costs 200 A Variable Manufacturing cost of goods sold 900 B Fixed manufacturing costs 100 C=A+B Manufacturing cost of goods sold 1000 Fixed selling and adm costs 90 Variable selling and adm costs 105 D Total selling and adm costs 195 E=C+D Cost of sales 1195 Net profit 55

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