Q13SE - Horngren'S Financial And Managerial Accounting

Question

Using absorption and variable costing 

Meyer Company reports the following information for March:

Net Sales Revenue $ 45,300 

Variable Cost of Goods Sold 12,500 

Fixed Cost of Goods Sold 11,800 

Variable Selling and Administrative Costs 14,000 

Fixed Selling and Administrative Costs 5,400 

Requirements: 

1. Calculate the gross profit and operating income for March using absorption costing. 
2. Calculate the contribution margin and operating income for March using variable costing.

 

Step-by-Step Solution

Answer

Answer

 

1. Gross profit is $21,000 and operating income is $1,600.
2. Contribution margin is $18,800 and operating income is $1,600.

Step 1: Calculation of gross profit using absorption costing

Particulars	Amount
Net sales revenue	$45,300
Less: Cost of goods sold
Variable cost of goods sold	$12,500
Fixed cost of goods sold	$11,800
Gross profit	$21,000
Less: Selling and administrative cost
Variable selling and administrative cost	$14,000
Fixed selling and administrative cost	$5,400
Operating Income	$1,600

Step 2: Calculation of gross profit using variable costing

Particulars	Amount
Net sales revenue	$45,300
Less: Variable costs
Variable cost of goods sold	$12,500
Variable selling and administrative cost	$14,000
Contribution margin	$18,800
Less: Fixed costs
Fixed costs of goods sold	$11,800
Fixed selling and administrative cost	$5,400
Operating Income	$1,600