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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
Sales Answer

Cost of Goods Sold:
Beginning Inventory Answer

Direct materials Answer

Direct labor Answer

AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin

Answer

Less: Ending Inventory Answer

Cost of Goods Sold Answer

AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin

Answer

AnswerGross profitOperating expensesVariable manufacturing overheadManufacturing overheadContribution margin

Answer

Net Income (Loss) Answer

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
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

AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin

Answer

Fixed costs:
AnswerGross profitVariable manufacturing overheadManufacturing overheadVariable operating expensesContribution margin

Answer

Operating expenses Answer

Total Fixed Cost Answer

Net Income (Loss) Answer

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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