Joshua Company has determined the following selling price and manufacturing cost per unit based on normal production of 72,000 units per year:Selling price per unit..$22Variable cost per unit:Direct materials...$4Direct labor .....4Variable factory overhead..2Variable cost per unit$10Fixed costs:Fixed factory overhead per year$ 360,000Fixed selling and administrative expense per year........48,000MonthUnits ProducedUnits SoldOctober..6,0003,000November ......1,0004,000December......8,0006,000October has no beginning inventories.REQUIRED:Prepare comparative income statements, including a comparative schedule of cost of goods sold, for each of these three months in 2016 under each of the following:1. Absorption costing (include under- or overapplied overhead).2. Variable costing. Joshua CompanyComparative Income StatementsFor the Three Months Ending December 31, 2016OctoberNovemberDecember(3,000 units sold)(4,000 units sold)(6,000 units sold)VariableAbsorptionCostingAbsorptionVariableAbsorptionVariableCostingCostingCostingCostingCostingSalesLess: Cost of goods sold(Overyunderapplied factory OHTotalGross margin (loss)Manufacturing marginLess: Fixed factory overheadSelling and administrativeTotalNet income (loss)Joshua CompanyComparative Schedule of Cost of Goods SoldFor the Three Months Ending December 31, 2016OctoberNovemberDecemberAbsorption VariableCostingAbsorptionVariableAbsorptionVariableCostingCostingCostingCostingCostingBeginning finished goods inventoryCost of goods manufacturedGoods available for saleLess ending finished goods inventoryCost of goods sold

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Accounting

Prepare comparative income statements, including a comparative schedule of cost of goods sold, for each of these three months in 2016 under each of the following: 1. Absorption costing (include under- or overapplied overhead). 2. Variable costing.

Prepare comparative income statements, including a comparative schedule of cost of goods sold, for each of these three months in 2016 under each of the following: 1. Absorption costing (include under- or overapplied 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

Inventory Valuation

Before discussing the topic inventory valuation let’s discuss the meaning of inventory. In accounting, inventory is also known as stock. Inventory means all the finished goods, materials, merchandise that a business holds for the purpose of selling it in the market with the motive of earning profit.

Topic Video

Question

Joshua Company has determined the following selling price and manufacturing cost per unit based on normal production of 72,000 units per year:
Selling price per unit..
$
22
Variable cost per unit:
Direct materials...
$
4
Direct labor .....
4
Variable factory overhead..
2
Variable cost per unit
$
10
Fixed costs:
Fixed factory overhead per year
$ 360,000
Fixed selling and administrative expense per year........
48,000
Month
Units Produced
Units Sold
October..
6,000
3,000
November ......
1,000
4,000
December......
8,000
6,000
October has no beginning inventories.
REQUIRED:
Prepare comparative income statements, including a comparative schedule of cost of goods sold, for each of these three months in 2016 under each of the following:
1. Absorption costing (include under- or overapplied overhead).
2. Variable costing.

Joshua Company
Comparative Income Statements
For the Three Months Ending December 31, 2016
October
November
December
(3,000 units sold)
(4,000 units sold)
(6,000 units sold)
Variable
Absorption
Costing
Absorption
Variable
Absorption
Variable
Costing
Costing
Costing
Costing
Costing
Sales
Less: Cost of goods sold
(Overyunderapplied factory OH
Total
Gross margin (loss)
Manufacturing margin
Less: Fixed factory overhead
Selling and administrative
Total
Net income (loss)
Joshua Company
Comparative Schedule of Cost of Goods Sold
For the Three Months Ending December 31, 2016
October
November
December
Absorption Variable
Costing
Absorption
Variable
Absorption
Variable
Costing
Costing
Costing
Costing
Costing
Beginning finished goods inventory
Cost of goods manufactured
Goods available for sale
Less ending finished goods inventory
Cost of goods sold

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