Question
Variable and Absorption Costing Summarized data for 2019 (the first year of operations) for Gorman Products, Inc., are as follows: Sales (70,000 units) $2,800,000 Production
Variable and Absorption Costing Summarized data for 2019 (the first year of operations) for Gorman Products, Inc., are as follows:
Sales (70,000 units) | $2,800,000 | ||||
Production costs (80,000 units) | |||||
Direct material | 880,000 | ||||
Direct labor | 720,000 | ||||
Manufacturing overhead: | |||||
Variable | 544,000 | ||||
Fixed | 320,000 | ||||
Operating expenses: | |||||
Variable | 175,000 | ||||
Fixed | 240,000 | ||||
Depreciation on equipment | 60,000 | ||||
Real estate taxes | 18,000 | ||||
Personal property taxes (inventory & equipment) | 28,800 | ||||
Personnel department expenses | 30,000 |
a. Prepare an income statement based on full absorption costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.
Absorption Costing Income Statement | ||||||
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Sales | Answer
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Cost of Goods Sold: | ||||||
Beginning Inventory | Answer
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Direct materials | Answer
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Direct labor | Answer
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AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin
| Answer
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Less: Ending Inventory | Answer
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Cost of Goods Sold | Answer
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AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin
| Answer
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AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin
| Answer
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Net Income (Loss) | Answer
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b. Prepare an income statement based on variable costing. Only use a negative sign with your answer for net income (loss), if the answer represents a net loss. Otherwise, do not use negative signs with any answers. Round answers to the nearest whole number, when applicable.
Variable Costing Income Statement | ||||||
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Sales | Answer
| |||||
Variable cost of Goods Sold: | ||||||
Beginning Inventory | Answer
| |||||
Direct materials | Answer
| |||||
Direct labor | Answer
| |||||
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin
| Answer
| |||||
Less: Ending Inventory | Answer
| |||||
Variable cost of goods sold | Answer
| |||||
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin
| Answer
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AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin
| Answer
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Fixed costs: | ||||||
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin
| Answer
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Operating expenses | Answer
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Total Fixed Cost | Answer
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Net Income (Loss) | Answer
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c. Assume that you must decide quickly whether to accept a special one-time order for 1,000 units for $25 per unit.
Which income statement presents the most relevant data? Answerabsorption costingvariable costing
Determine the apparent profit or loss on the special order based solely on these data. Use a negative sign with your answer if the special order creates an apparent loss. Round answer to the nearest whole number.
$Answer
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