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Question
State Industries has the following information for 2015:Units produced and sold 3,000 units
Selling Price $260/unit
Direct materials $20/unit
Direct labor $40/unit
Fixed manufacturing overhead $120,000/yr
Fixed selling and administrative costs $160,000/yr
Variable manufacturing overhead $35/unit
Variable selling and administrative costs $25/unit
There are no beginning inventories. Prepare an income statement for the year under absorption costing.
State Industries
Income Statement
Year Ended December 31, 2015
Sales(3,000 units $260) $780,000
- Cost of Goods Sold 405,000
Gross Margin 375,000
- Selling and Administrative Costs 235,000
Operating Income 140,000
Feedback: Cost of goods sold = {Total variable manufacturing costs (x units sold)} + Fixed manufacturing overhead.
Cost of goods sold = [($20 + $40 + $35)(Total variable manufacturing costs) 3,000 units] + $120,000 (Fixed manufacturing overhead). Cost of goods sold = $405,000.
Selling and administrative Costs = ($25 3,000 units) + $160,000 = $235,000.
Answer
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