Philadelphia Company has the following information for March:Sales $455,000 Variable cost of goods sold 240,000 Fixedmanufacturing costs 70,000 Variable selling and administrativeexpenses 52,000 Fixed selling and administrating expenses 35,000For credit, show all your work Determine the: (a) manufacturingmargin (b) contribution margin (c) income from operations forPhiladelphia Company.
Philadelphia Company has the following information for March:Sales $455,000 Variable cost of goods sold 240,000 Fixedmanufacturing costs 70,000 Variable selling and administrativeexpenses 52,000 Fixed selling and administrating expenses 35,000For credit, show all your work Determine the: (a) manufacturingmargin (b) contribution margin (c) income from operations forPhiladelphia Company.
Related questions
On June 30, 2014, the end of the first month of operations,Smithey Manufacturing Co. prepared the following income statement,based on the variable costing concept:
| Sales (90,000units) | $1,260,000 | |||
| Variable cost of goodssold: | ||||
| Variable cost of goods manufactured(110,000 units x $10 per unit) | $1,100,000 | |||
| Less ending inventory (20,000 unitsx $10 per unit) | 200,000 | |||
| Variablecost of goods sold | 900,000 | |||
| Manufacturingmargin | $360,000 | |||
| Variable selling andadministrative expenses | 12,000 | |||
| Contributionmargin | $348,000 | |||
| Fixed costs: | ||||
| Fixed manufacturing costs | $60,500 | |||
| Fixed selling and administrativeexpenses | 21,000 | 81,500 | ||
| Income fromoperations | $266,500 | |||
a. Prepare an absorption costing incomestatement. In your computations, round unit costs to two decimalplaces and round final answers to the nearest dollar.
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Income Statements under Absorption and Variable Costing
Shawnee Motors Inc. assembles and sells MP3 players. The companybegan operations on August 1 and operated at 100% of capacityduring the first month. The following data summarize the resultsfor August:
| Sales (18,500 units) | $2,960,000 | ||||
| Production costs (24,000 units): | |||||
| Directmaterials | $1,420,800 | ||||
| Directlabor | 681,600 | ||||
| Variablefactory overhead | 340,800 | ||||
| Fixedfactory overhead | 228,000 | 2,671,200 | |||
| Selling and administrative expenses: | |||||
| Variableselling and administrative expenses | $414,000 | ||||
| Fixedselling and administrative expenses | 160,300 | 574,300 | |||
If required, round interim per-unit calculations to the nearestcent.
a. Prepare an income statement according to theabsorption costing concept.
| Shawnee Motors Inc. | |
| Absorption Costing Income Statement | |
| Forthe Month Ended August 31 | |
| Sales | $ |
| Cost of goods sold | |
| Gross profit | $ |
| Selling and administrativeexpenses | |
| Income fromoperations | $ |
Feedback
b. Prepare an income statement according to thevariable costing concept.
| Shawnee Motors Inc. | ||
| Variable Costing Income Statement | ||
| Forthe Month Ended August 31 | ||
| Sales | $ | |
| Variable cost of goodssold | ||
| Manufacturing margin | $ | |
| Variable selling and administrativeexpenses | ||
| Contribution margin | $ | |
| Fixed costs: | ||
| Fixed factoryoverhead | $ | |
| Fixed selling and administrativeexpenses | ||
| Total fixed costs | ||
| Income fromoperations | $ | |
Feedback
c. What is the reason for the difference in theamount of income from operations reported in (a) and (b)?
Under the absorption costing method, the fixedmanufacturing cost included in the cost of goods sold is matchedwith the revenues. Under variable costing , all ofthe fixed manufacturing cost is deducted in the period in which itis incurred, regardless of the amount of inventory change. Thus,when inventory increases, the absorption costingincome statement will have a higher income from operations thanwill the variable costing income statement.
Plyler Enterprises sells garage doors in Erie, PA and hasprovided the following information:
# of unitssold 15,000
Average sellingprice $25per unit
Variable sellingexpense $5per unit
Variable administrativeexpense $2.50per unit
Fixed sellingexpenses $50,000
Fixed Administrativeexpenses $30,000
Inventory atbeginning $32,000
Inventory atend $50,000
Inventorypurchases $152,000
1. Provide the figures for the TRADITIONAL income statementbelow for Plyler Enterprises (ignore taxes):
Account | Amount | Show Calculations |
Sales | ||
Cost of goods sold | ||
Gross margin | Sales less cost of goods sold | |
Selling expenses | ||
Administrative expenses | ||
Net operating income | Gross margin less Selling and Administrative |
2. Provide the figures for the CONTRIBUTION FORMAT incomestatement below for Plyler Enterprises (ignore taxes):
Account | Amount | Show Calculations |
Sales | ||
Variable expenses: | ||
Cost of goods sold | ||
Selling expenses | ||
Administrative exp. | ||
Contribution margin | Sales less variable expenses | |
Fixed expenses: | ||
Selling expenses | ||
Administrative exp. | ||
Net operating income | Sales less variable and fixed expenses | |
