Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $41 per unit and had sales of 24,600 units in the current year, 2015. STI has no inventory on hand at the beginning of 2015 and is projecting sales of 27,800 units in 2016. STI is planning the same production level for 2016 as in 2015, 26,200 units. The variable manufacturing costs for STI are $12 and the variable selling costs are only $0.30 per unit. The fixed manufacturing costs are $157,200 per year and the fixed selling costs are $620 per year.
Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of certain special-duty auto transmissions used primarily for police and military applications. The part sells for $41 per unit and had sales of 24,600 units in the current year, 2015. STI has no inventory on hand at the beginning of 2015 and is projecting sales of 27,800 units in 2016. STI is planning the same production level for 2016 as in 2015, 26,200 units. The variable manufacturing costs for STI are $12 and the variable selling costs are only $0.30 per unit. The fixed manufacturing costs are $157,200 per year and the fixed selling costs are $620 per year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Please do not give solution in image format thanku
Transcribed Image Text:2. Prepare an income statement for each year using variable costing. (Round your final answers to
nearest whole dollar amount.)
Less: Cost of goods sold
Available for sale
Cost of goods sold
Contribution margin
Less selling and administrative costs
Operating income
SECURITY TECHNOLOGY INC.
Variable Costing
Income Statement
2015
3. Prepare a reconciliation and explanation of the difference each year in the operating income resulting
from the full- and variable-costing methods. (Negative amounts should be indicated by a minus sign.
Do not round intermediate calculations. Round your "Fixed overhead rate" answers to 2 decimal
places, and other final answers to nearest whole dollar amount.)
SECURITY TECHNOLOGY INC.
Reconciling Difference in Operating Income
between Full and Variable Costing
2015
Change in inventory in units
Multiply times fixed overhead rate
Difference in operating income
$
0 $
2016
2016
0
Transcribed Image Text:Security Technology Inc. (STI) is a manufacturer of an electronic control system used in the manufacture of
certain special-duty auto transmissions used primarily for police and military applications. The part sells for
$41 per unit and had sales of 24,600 units in the current year, 2015. STI has no inventory on hand at the
beginning of 2015 and is projecting sales of 27,800 units in 2016. STI is planning the same production level
for 2016 as in 2015, 26,200 units. The variable manufacturing costs for STI are $12 and the variable selling
costs are only $0.30 per unit. The fixed manufacturing costs are $157,200 per year and the fixed selling
costs are $620 per year.
Required:
1. Prepare an income statement for each year using full costing. (Round your final answers to nearest
whole dollar amount.)
Sales
Less: Cost of goods sold
Available for sale
Cost of goods sold
Gross margin
Less selling and administrative costs
Operating income
SECURITY TECHNOLOGY INC.
Full Costing
Income Statement
2015
$
1,008,600
2016
$
1,139,800
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