Question
Music World produces student-grade violins for beginning violin students. The company produced 2 comma 500 violins in its first month of operations. At month-end, 500
Music World produces student-grade violins for beginning violin students. The company produced 2 comma 500 violins in its first month of operations. At month-end, 500 finished violins remained unsold. There was no inventory in work in process. Violins were sold for $ 125.00 each. Total costs from the month are as follows:
Direct materials used. . . . . . . . . . . . . . . . . . . . . . . .
$119,500
Direct labor. . . . . . . . . . . . . . . . . . . . . . . . . . . .
$60,000
Variable manufacturing overhead. . . . . . . . . . . . . .
$28,000
Fixed manufacturing overhead. . . . . . . . . . . . . . . . .
$42,500
Variable selling and administrative expenses. . . . .
$8,000
Fixed selling and administrative expenses. . . . . . .
$13,000
Compute the following amounts that would be shown on these income statements:
Requirement 1. Gross Profit
Identify the formula, then compute the gross profit.
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| = | Gross profit |
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| = |
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Requirement 2. Contribution Margin
Identify the formula, then compute the contribution margin.
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| = | Contribution margin |
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| = |
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Requirement 3. Total expenses shown below the gross profit line
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+ |
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= | Total expenses below the gross profit line |
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Requirement 4. Total expenses shown below the contribution margin line
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+ |
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= | Total expenses below the contribution margin line |
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Requirement 5. Dollar value of ending inventory under absorption costing
The dollar value of ending inventory under absorption costing is $ |
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Requirement 6. Dollar value of ending inventory under variable costing
The dollar value of ending inventory under variable costing is $ |
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Requirement 7. Which income statement will have a higher operating income? By how much? Explain.
The |
| income statement will have a higher operating income by $ |
| . Under absorption costing | |
| Under variable costing, these costs are | ||||
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Choose from any list or enter any number in the input fields and then continue to the next question.
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