Question
The annual data that follows pertian to Joe's Pool Stuff, a manufacturer of swimming goggles (the company had no beginning inventories): Sales price $43 Variable
The annual data that follows pertian to Joe's Pool Stuff, a manufacturer of swimming goggles (the company had no beginning inventories):
Sales price | $43 |
Variable manufacturing expense per unit | $16 |
Sales commision expense per unit | $11 |
Fixed manufacturing overhead | $1,640,000 |
Number of goggles produced | 205,000 |
Number of goggles sold | 195,000 |
Requirements
1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Joe's Pool Stuff for the year.
2. Which statement shows the higher operating income? Why?
3. The company marketing vice president believes a new sales promotion that costs $140,000 would increase sales to 205,000 goggles. Should the company go ahead with the promotion? Give your reason.
Requirement 1. Prepare both conventional (absorption costing) and contribution margin (variable costing) income statements for Joe's Pool Stuff for the year. Begin with the conventional (absorption costing) income statement.
Joe's Pool Stuff Income Statement (Absorption Costing)
For the Year Ended December 31
Less: | |
Less: Operating Expenses | |
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