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Problem 15 (30 points) company produces cat condos which it e statement for the first year of to sell for $330 per unit. The accountant
Problem 15 (30 points) company produces cat condos which it e statement for the first year of to sell for $330 per unit. The accountant has produced a forecast income trading using absorption costing Kitty Corp: Income statement for period ending 3/31/2016 Sales revenue (1,000 condos@ $330 per unit) Less: Cost of goods sold (COGS) Variable COGS direct materials (1.000 condos@$82 per unit) Variable COGS: direct labor (1,000 condos @ $20 per unit) Fixed cost of goods sold* 330,000 (82,000) (20,000) Gross profit Variable sales commissions ($18 for each condo sold) Administrative salaries 198,000 (18,000) (55,000) (15,000) Fixed advertising expenses Shipping and handling expense (1,000 condos @ $10 per unit, Net income 10.000. The fixed cost of goods sold is an allocation for the company's foxed manufacturing overhead. The total foed manufacturing overhead for the year is estimated at $30,000 and is allocated to products using the total units produced. The company expects to produce and sell 1,000 condos during the first year of trading. Required a) Using the information above, prepare a revised income statement for the company's first year of trading using a contribution margin-based variable costing format (hint you need to identify contribution margin by reclassifying costs according to whether they are variable or fixed in nature). b) Using your answer from part a), calculate the company's operating leverage. PROBLEM 2 CONTINUES ON NEXT PAGE
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