Answer to Question #146529 in Other for sumaid

Question

The following data were taken from the records of a company.

Period 1 Period 2 Period 3
Production(units) 30,000 38000 27000
Sales 30,000 27000 38000
Opening stock 11,000
Closing stock ------ 11,000 -------


Per unit cost are as follows:
Direct material $ 1.5
Direct labor 1.0
Production overhead 3.0
Selling price per unit $ 9
Administrative overheads are fixed at $25000 and one third of the production overheads are fixed.
Required
Prepare separate income statements for all three year

Answer 1

Income Statement for Period 1

Period 1

Sales Revenue (30,000 * $9)

$270,000

Less: Cost of goods sold -

Direct materials (30,000 * $1.5)

($45,000)

Direct labor (30,000 * $1)

($30,000)

Variable production overhead ($3*2/3 * 30,000)

($60,000)

Fixed production overhead ($3*1/3*30,000)

($30,000)

Total cost of goods sold

($165,000)

Gross Profit

$105,000

Less: Selling and administrative expenses (fixed)

($25,000)

Net Operating Income

$80,000

Income Statement for Period 2

Period 2

Sales Revenue (27,000 * $9)

$243,000

Less: Cost of goods sold -

Direct materials (27,000 * $1.5)

($40,500)

Direct labor (27,000 * $1)

($27,000)

Variable production overhead ($3*2/3 * 27,000)

($54,000)

Fixed production overhead ($3*1/3*38,000)

($38,000)

Total cost of goods sold

($159,500)

Gross Profit

$83,500

Less: Selling and administrative expenses (fixed)

($25,000)

Net Operating Income

$58,500

Income Statement for Period 3

Period 3

Sales Revenue (38,000 * $9)

$342,000

Less: Cost of goods sold -

Direct materials (38,000 * $1.5)

($57,000)

Direct labor (38,000 * $1)

($38,000)

Variable production overhead ($3*2/3 * 38,000)

($76,000)

Fixed production overhead ($3*1/3*27,000)

($27,000)

Total cost of goods sold

($198,000)

Gross Profit

$144,000

Less: Selling and administrative expenses (fixed)

($25,000)

Net Operating Income

$119,000