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a Income Statement (absorption costing) For the Year Ended December 31, 2019 Sales Cost of goods sold: Total manufacturing costs Gross profit Net income Income Statement (variable costing) For the Year Ended December 31, 2019 Sales 2,800,000 Variable cost of goods sold: Operating expenses Direct materials Direct labor Manufacturing overhead Total variable manufacturing costs 175,000 880,000 720,000 544,000 2,319,000 268,000 Total variable cost Manufacturing margin 2,051,000 $ 749,000 175,000 Contribution margin Less: fixed costs and expenses Manufacturing overhead Operating expenses Total fixed costs and expenses 574,000 $ 320,000 240,000 560,000 Net income 14,000

a Income Statement (absorption costing) For the Year Ended December 31, 2019 Sales Cost of goods sold: Total manufacturing costs Gross profit Net income Income Statement (variable costing) For the Year Ended December 31, 2019 Sales 2,800,000 Variable cost of goods sold: Operating expenses Direct materials Direct labor Manufacturing overhead Total variable manufacturing costs 175,000 880,000 720,000 544,000 2,319,000 268,000 Total variable cost Manufacturing margin 2,051,000 $ 749,000 175,000 Contribution margin Less: fixed costs and expenses Manufacturing overhead Operating expenses Total fixed costs and expenses 574,000 $ 320,000 240,000 560,000 Net income 14,000

FINANCIAL ACCOUNTING
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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Summarized data for 2019 (the first year of operations) for Gorman Products, In. are as follows

Sales (70,000 units) $2,800,00
Production costs (80,000 units):  
     Direct materials 880,000
     Direct labor 720,000
Manufacturing overhead:  
     Variable 544,000
     Fixed 320,000
Operating expenses:  
     Variable 175,000
     Fixed 240,000
Depreciation on equipment 60,000
Real estate taxes 18,000
Personal property taxes (inventory and equipment 28,000
Personnel department expenses 30,000

 

a.) Prepare an income statement based on full absortion costing

b) Prepare an income statement based on variable costing (I completed this, see attached spreadsheet.  I just need help on a, c, and d)

c) Assume that you must decide quickly whether to accept a special one-time order for 1000 units for $25 per unit.  Which income statement presentthe most relevant data?  Determine the apparent profit or loss on the special order based solely on these data.

d) If the ending inventory is destroyed by fire, which costing approach would you use as a basis for filing an insurance claim for the fire loss?  Why?

a Income Statement (absorption costing) For the Year Ended December 31, 2019 Sales Cost of goods sold: Total manufacturing costs Gross profit Net income Income Statement (variable costing) For the Year Ended December 31, 2019 Sales 2,800,000 Variable cost of goods sold: Operating expenses Direct materials Direct labor Manufacturing overhead Total variable manufacturing costs 175,000 880,000 720,000 544,000 2,319,000 268,000 Total variable cost Manufacturing margin 2,051,000 $ 749,000 175,000 Contribution margin Less: fixed costs and expenses Manufacturing overhead Operating expenses Total fixed costs and expenses 574,000 $ 320,000 240,000 560,000 Net income 14,000
Transcribed Image Text:a Income Statement (absorption costing) For the Year Ended December 31, 2019 Sales Cost of goods sold: Total manufacturing costs Gross profit Net income Income Statement (variable costing) For the Year Ended December 31, 2019 Sales 2,800,000 Variable cost of goods sold: Operating expenses Direct materials Direct labor Manufacturing overhead Total variable manufacturing costs 175,000 880,000 720,000 544,000 2,319,000 268,000 Total variable cost Manufacturing margin 2,051,000 $ 749,000 175,000 Contribution margin Less: fixed costs and expenses Manufacturing overhead Operating expenses Total fixed costs and expenses 574,000 $ 320,000 240,000 560,000 Net income 14,000
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