Prepare an Income Statement for the ff data of EH Corporation: Selling Expenses 70,000.00 Raw Materials inventory, Beginning 45,000.00 Raw Materials inventory, end 30,000.00 Work in process beginning 90,000.00 Work in process end 50,000.00 Finished Goods beginning 130,000.00 Finished Goods end 105,000.00 Utilities factory 18,000.00 Direct labor cost 75,000.00 Depreciation, Factory 81,000.00 Purchases of raw materials 375,000.00 Sales 1,250,000.00 Insurance Factory 20,000.00 Supplies, Factory 7,500.00 Administrative expenses 135,000.00 Indirect labor 150,000.00 Maintenance, factory 43,500.00
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Prepare an Income Statement for the ff data of EH Corporation:
| Selling Expenses | 70,000.00 |
| Raw Materials inventory, Beginning | 45,000.00 |
| Raw Materials inventory, end | 30,000.00 |
| Work in process beginning | 90,000.00 |
| Work in process end | 50,000.00 |
| Finished Goods beginning | 130,000.00 |
| Finished Goods end | 105,000.00 |
| Utilities factory | 18,000.00 |
| Direct labor cost | 75,000.00 |
| 81,000.00 | |
| Purchases of raw materials | 375,000.00 |
| Sales | 1,250,000.00 |
| Insurance Factory | 20,000.00 |
| Supplies, Factory | 7,500.00 |
| Administrative expenses | 135,000.00 |
| Indirect labor | 150,000.00 |
| Maintenance, factory | 43,500.00 |
Step by step
Solved in 2 steps with 1 images
