Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units) $4,500,000 Production costs (80.000 units) Direct material 1,320,000 Direct labor 1,080.000 Manufacturing overhead: Variable 816,000 Fixed 480,000 Operating expenses: Variable 252,000 Fixed 360,000 Depreciation on equipment Real estate taxes 90,000 27,000 Personal property taxes (inventory & equipment) 43.200 Personnel department expenses 45,000 a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. Absorption Costing Income Statement Sales S 4,500.000 Cost of Goods Sold: Beginning Inventory Direct materials 1,320,000 Direct labor 1.080,000 Variable manufacturing overhead Less: Ending Inventory Cost of Goods Sold Gross profit 10 Operating expenses Net Income (Loss)

Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (75,000 units) $4,500,000 Production costs (80.000 units) Direct material 1,320,000 Direct labor 1,080.000 Manufacturing overhead: Variable 816,000 Fixed 480,000 Operating expenses: Variable 252,000 Fixed 360,000 Depreciation on equipment Real estate taxes 90,000 27,000 Personal property taxes (inventory & equipment) 43.200 Personnel department expenses 45,000 a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable. Absorption Costing Income Statement Sales S 4,500.000 Cost of Goods Sold: Beginning Inventory Direct materials 1,320,000 Direct labor 1.080,000 Variable manufacturing overhead Less: Ending Inventory Cost of Goods Sold Gross profit 10 Operating expenses Net Income (Loss)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

How do I prepare an income statement based on full absorption costing?

Variable and Absorption Costing
Summarized data for 2016 (the first year of operations) for Gorman Products, Inc., are as follows:
Sales (75,000 units)
$4,500,000
Production costs (80,000 units)
Direct material
1,320,000
Direct labor
1,080,000
Manufacturing overhead:
Variable
816,000
Fixed
480,000
Operating expenses:
Variable
252,000
Fixed
360,000
Depreciation on equipment
90,000
Real estate taxes
27,000
Personal property taxes (inventory & equipment)
43,200
Personnel department expenses
45,000
a. Prepare an income statement based on full absorption costing.
Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.
Absorption Costing Income Statement
Sales
$ 4,500,000
Cost of Goods Sold:
Beginning Inventory
Direct materials
1,320,000
Direct labor
1,080,000
Variable manufacturing overhead
Less: Ending Inventory
Cost of Goods Sold
Gross profit
Operating expenses
Net Income (Loss)
b. Prepare an income statement based on variable costing.
Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.
Variable Costing Income Statement
Sales
$4
Variable cost of Goods Sold:
Beginning Inventory
0.
Direct materials
%24

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