Chapter 9.B, Problem 2E

Standard Cost Flows: Income Statement Preparation
Swain Company manufactures one product. it does not maintain any beginning or ending inventories, and its uses a standard cost system. The company’s beginning balance in Retained Earnings is$70,000. It sells one product for S165 per unit and it generated total sales during the period of $5.500 while incurring selling and administrative expenses of S54,000. Swain Company does not have any variable manufacturing overhead costs and its standard cost card for its only product is as follows:

During the period. Swain recorded the following variances:

Required:
1. When Swain closes its standard cost variances, the cost of goods sold will increase (decrease) by how much?
2. Using Exhibit 9B−5 as a guide. prepare an income statement for the year.
3. What is Swain’s ending balance in Retained Earnings?