Biscayne Industries has determined the cost of manufacturing a unit of product as follows, based on normal production of 100,000 units per year:Direct materials..$ 5Direct labor4Variable factory overhead.3Fixed factory overhead.Total cost.$15Operating statistics for March and April include the following:MarchAprilUnits produced.12,0008,000Units sold...8,00012,000Selling and administrativeexpenses (all fixed)..$12,000$12,000The selling price is $20 per unit. There were no inventories on March 1, and there is no work in process on April 30.REQUIRED:Prepare comparative income statements for each month under each of the following:1. Absorption costing (include under- or overapplied fixed overhead).2. Variable costing. Biscayne IndustriesIncome StatementFor the Month Ended March 31, 20-(1)(2)Absorption CostingVariable CostingSales (8,000 units)Cost of goods soldLess overapplied fixed overheadGross margin$ 160,000$ 160,00096,000$ 120,00011,000109,00051,000$ 64,000Manufacturing marginFixed factory overheadSelling and administrative expenseNet income (loss)25,00012,00039,00012,00037,00027,000* Calculation of overapplied fixed factory overhead:Fixed overhead per year+ 12 = Fixed overhead per monthFixed factory overhead applied to productionFixed factory overhead per monthFixed factory overhead over(underjappliedBiscayne IndustriesIncome StatementFor the Month Ended April 30, 20-(1)Absorption Costing(2)Variable CostingSales (12,000 units)Cost of goods soldAdd underapplied fixed overheadGross marginManufacturing marginFixed factory overheadSelling and administrative expenseNet income (loss)* Calculation of overapplied fixed factory overhead:Fixed factory overhead applied to productionFixed factory overhead per monthFixed factory overhead over(underjapplied

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Description: Biscayne Industries has determined the cost of manufacturing a unit of product as follows, based on normal production of 100,000 units per year:Direct materials..$ 5Direct labor4Variable factory overhead.3Fixed factory overhead.Total cost.$15Operati

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Business

Accounting

Prepare comparative income statements for each month under each of the following: 1. Absorption costing (include under- or overapplied fixed overhead). 2. Variable costing.

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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Concept explainers

Process Costing

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure. 

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.

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Question

Biscayne Industries has determined the cost of manufacturing a unit of product as follows, based on normal production of 100,000 units per year:
Direct materials..
$ 5
Direct labor
4
Variable factory overhead.
3
Fixed factory overhead.
Total cost.
$15
Operating statistics for March and April include the following:
March
April
Units produced.
12,000
8,000
Units sold...
8,000
12,000
Selling and administrative
expenses (all fixed)..
$12,000
$12,000
The selling price is $20 per unit. There were no inventories on March 1, and there is no work in process on April 30.
REQUIRED:
Prepare comparative income statements for each month under each of the following:
1. Absorption costing (include under- or overapplied fixed overhead).
2. Variable costing.

Biscayne Industries
Income Statement
For the Month Ended March 31, 20-
(1)
(2)
Absorption Costing
Variable Costing
Sales (8,000 units)
Cost of goods sold
Less overapplied fixed overhead
Gross margin
$ 160,000
$ 160,000
96,000
$ 120,000
11,000
109,000
51,000
$ 64,000
Manufacturing margin
Fixed factory overhead
Selling and administrative expense
Net income (loss)
25,000
12,000
39,000
12,000
37,000
27,000
* Calculation of overapplied fixed factory overhead:
Fixed overhead per year
+ 12 = Fixed overhead per month
Fixed factory overhead applied to production
Fixed factory overhead per month
Fixed factory overhead over(underjapplied
Biscayne Industries
Income Statement
For the Month Ended April 30, 20-
(1)
Absorption Costing
(2)
Variable Costing
Sales (12,000 units)
Cost of goods sold
Add underapplied fixed overhead
Gross margin
Manufacturing margin
Fixed factory overhead
Selling and administrative expense
Net income (loss)
* Calculation of overapplied fixed factory overhead:
Fixed factory overhead applied to production
Fixed factory overhead per month
Fixed factory overhead over(underjapplied

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what is the net operating income for the month under variable costing?