A business operated at 100% capacity during its first month of operations, with the following results: Sales (90 units) $90,000Production costs (100 units) Direct materials$40,000 Direct labor 20,000 Variable factory overhead 2,000 Fixed factory overhead 7,000 Total manufacturing costs 69,000Operating expenses: Variable Variable operating expenses$ 8,000 Fixed operating expenses 1,000 Total operating expenses 9,000Use this information to complete a variable costing income statement. Please when completing the variable costing income statement , offer details where the numbers are coming from.

The major component of a variable costing income statement is contribution margin. It is calculated as sales minus total variable costs. Then the profit is achieved by substracting the total fixed costs from the contribution margin. One of the key feature of variable costing is that it only considers variable costs while estimating the ending inventory. Units Produced = 100 Units sold = 90 Ending Inventory = Units Produced - Units Sold = 100 - 90 = 10 Valuation of Ending Inventory = Total Variable Production OverheadTotal Units Produced × Unsold Units = 62000100 × 10 = 6200 Thus , the value of ending inventory by variable costing is $6200.

Answered: A business operated at 100% capacity…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A business operated at 100% capacity during its first month of operations, with the following results:

Sales (90 units)		$90,000
Production costs (100 units)
Direct materials	$40,000
Direct labor	20,000
Variable factory overhead	2,000
Fixed factory overhead	7,000
Total manufacturing costs		69,000
Operating expenses:
Variable
Variable operating expenses	$ 8,000
Fixed operating expenses	1,000
Total operating expenses		9,000

Use this information to complete a variable costing income statement.

Please when completing the variable costing income statement , offer details where the numbers are coming from.

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