Q14SE

Question: Use the following information to prepare a standard cost income statement for Mitchell Company for 2018.

Cost of Goods Sold (at standard) \( 366,000

Direct Labor Efficiency Variance \) 19,500 F

Sales Revenue (at standard) 570,000

Variable Overhead Efficiency Variance 3,300 U

Direct Materials Cost Variance 7,200 U

Fixed Overhead Volume Variance 12,500 F

Direct Materials Efficiency Variance 2,700 U

Selling and Administrative Expenses 71,000

Direct Labor Cost Variance 42,000 U

Variable Overhead Cost Variance 1,700 F

Fixed Overhead Cost Variance 2,100 F

Verified

Answer

The operating income of the Mitchell Company is computed as $113,600

1Step 1 Definition of cost of sales revenue

The sales revenue is defined as the revenue collected by the company in exchange for the goods sold by the business to the customers.

2Step 2 Preparation standard cost Income statement

Mitchell Company
Standard Cost Income Statement
For the year ended December 31, 2018
	Amount ($)	Amount ($)	Amount ($)
Sales Revenue at standard			570,000
Cost of goods sold at standard cost		366,000
Manufacturing Cost Variances:
Direct Materials Cost Variance	7,200
Direct Material Efficiency Variance	2,700
Direct Labor Cost Variance	42,000
Direct Labor Efficiency Variance	-19,500
Variable Overhead Cost Variance	-1,700
Variable Overhead Efficiency Variance	3,300
Fixed Overhead Cost Variance	-2,100
Fixed Overhead Volume Variance	-12,500
Total Manufacturing Variance		19,400
Cost of goods sold at actual cost			385,400
Gross Profit			184,600
Selling and Administrative Expenses			71,000
Operating Income			113,600