(20 pts) A company had the following data (in millions) for 2014 Beginning and e
ID: 2565626 • Letter: #
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 Variable 200 100 Fixed Variable Manufacturing cost of goods sold Manufacturing cost of goods sold Selling and Administrative expenses Vatiable Fixed 105 4D 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 applicableExplanation / Answer
Variable costing
Cost sheet (contribution approach)
Since company has no opening and closing inventory hence assumption is taken that company sold all units which it has produced.
Absorption costing
Variable($105) + Fixed($90) Selling and Administrative expenses
Net income under absorption costing
Particulars Amount (in million) (A) Direct material used $450 Direct Labour $250 Indirect manufacturing overhead (Variable) $200 Variable selling and administrative expenses $105 Variable Manufacturing costs of goods sold (It is variable since there are no fixed cost included) $1005 (B) sales $1250 Less : varriable cost of goods sold $1005 Contribution (19.6%) = ($245/$1250*100) $245 Less : Fixed manufacturing cost $100 Fixed selling and administrative expenses $90 Net Income $55Related Questions
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