Question
Pumpkin Plastic Products Company manufactures pipes and applies overhead costs at a budgeted rate of $5 per direct labor-hour. The following data are obtained from
Pumpkin Plastic Products Company manufactures pipes and applies overhead costs at a budgeted rate of $5 per direct labor-hour. The following data are obtained from the accounting records for June 2014:
Direct materials $300,000
Direct labor (1,400 hours @ $10/hour) $ 14,000
Indirect labor (20% variable) $ 20,000
Plant facility rent $ 100,000
Depreciation on plant machinery and equipment $ 40,000
Sales commissions (all variable) $ 30,000
Administrative expenses $ 40,000
Assume that the selling price is $20/unit and that sales were 700 units. Assume you produced everything you sold (there is no ending inventory); there was no beginning inventory.
Required:
Prepare a contribution margin income statement in good form.
Prepare a traditional (GAAP), "absorption" income statement in good form.
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