Prepare the company's income statement under absorption costing.
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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, 350 bikes were produced and 225 were sold. Income statement information under variable costing follows.
Sales (225 × $1,750) | $ 393,750 |
---|---|
Variable cost of goods sold (225 × $650) | 146,250 |
Variable selling and administrative expenses (225 × $65) | 14,625 |
Contribution margin | 232,875 |
Fixed |
63,000 |
Fixed selling and administrative expenses | 80,000 |
Income | $ 89,875 |
Prepare the company's income statement under absorption costing.
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- During the first month of operations ended May 31, Big Sky Creations Company produced 40,000 designer cowboy boots, of which 36,000 were sold. Operating data for the month are summarized as follows: During June, Big Sky Creations produced 32,000 designer cowboy boots and sold 36,000 cowboy boots. Operating data for June are summarized as follows: Instructions 1. Using the absorption costing concept, prepare income statements for (a) May and (b) June. 2. Using the variable costing concept, prepare income statements for (a) May and (b) June. 3. a. Explain the reason for the differences in operating income in (1) and (2) for May. b. Explain the reason for the differences in operating income in (1) and (2) for June. 4. Based on your answers to (1) and (2), did Big Sky Creations Company operate more profitably in May or in June? Explain.Jellison Company had the following operating data for its first two years of operations: Jellison produced 90,000 units in the first year and sold 80,000. In the second year, it produced 80,000 units and sold 90,000 units. The selling price per unit each year was 12. Jellison uses an actual costing system for product costing. Required: 1. Prepare income statements for both years using absorption costing. Has firm performance, as measured by income, improved or declined from Year 1 to Year 2? 2. Prepare income statements for both years using variable costing. Has firm performance, as measured by income, improved or declined from Year 1 to Year 2? 3. Which method do you think most accurately measures firm performance? Why?At the end of the first year of operations, 21,500 units remained in the finished goods inventory. The unit manufacturing costs during the year were as follows: Determine the cost of the finished goods inventory reported on the balance sheet under (a) the absorption costing concept and (b) the variable costing concept.
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- Last year, Orsen Company produced 25,000 juicers and sold 26,500 juicers for 60 each. The actual variable unit cost is as follows: Fixed overhead was 320,000. Fixed selling expenses consisted of advertising copayments totaling 110,000. Fixed administrative expenses were 236,000. There were no beginning and ending work-in-process inventories. Beginning finished goods inventory was 148,000 for 4,000 juicers. The value of ending inventory reported on the financial statements was Refer to the information in 2.24. The gross margin percentage for last year was a. 12.57% b. 55.67% c. 28.95% d. 38.33%The following product costs are available for Kellee Company on the production of eyeglass frames: direct materials, $32,125; direct labor, $23.50; manufacturing overhead, applied at 225% of direct labor cost; selling expenses, $22,225; and administrative expenses, $31,125. The direct labor hours worked for the month are 3,200 hours. A. What are the prime costs? B. What are the conversion costs? C. What is the total product cost? D. What is the total period cost? E. If 6.425 equivalent units are produced, what is the equivalent material cost per unit? F. What is the equivalent conversion cost per unit?Using the information in the previous exercises about Marleys Manufacturing, determine the operating income for department B, assuming department A sold department B 1,000 units during the month and department A reduces the selling price to the market price.