Q16E - Horngren'S Financial And Managerial Accounting

Question

Question: Preparing variable costing income statements, production exceeds sales 

ReVitalAde produced 13,000 cases of powdered drink mix and sold 12,000 cases in April 2018. The sales price was \(29, variable costs were \)12 per case (\(9 manufacturing and \)3 selling and administrative), and total fixed costs were \(100,000 (\)91,000 manufacturing overhead and $9,000 selling and administrative). The company had no beginning Finished Goods Inventory. 

Requirements: 

1. Prepare the April income statement using variable costing. 
2. Determine the product cost per unit and the total cost of the 1,000 cases in Finished Goods Inventory as of April 30.

 

Step-by-Step Solution

Answer

Answer

 

1. Operating income is $104,000
2. Total unit product cost is $9 and finished goods inventory is $9,000.

 

Step 1: Income statement using variable costing

Particulars	Amount
Net sales revenue ($29x12,000)	$348,000
Less: Variable costs ($12x12,000)	$144,000
Contribution margin	$204,000
Less: Fixed costs
Fixed costs of goods sold	$91,000
Fixed selling and administrative cost	$9,000
Operating Income	$104,000

Step 2: Calculation of product cost per unit and total cost of 1,000 cases in finished goods inventory as of April 30.

Particulars	Amount
Variable manufacturing cost	$9
Total unit product cost	$9
Finished goods inventory, ending balance ($9x1,000)	$9,000