Answer:
<em>Part a</em>
Nelter Corporation
<u>Contribution format income statement for the month using variable costing</u>
Sales ($ 122 x 6,590) $803,980
Less Cost of Goods Sold
Beginning Inventory $20,300
Add Cost of Goods Manufactured $462,000
Less Ending Inventory ($21,000) ($461,300)
Contribution $342,680
Less Expenses
Selling and administrative expense :
Variable ($21 x 6,590) $138,390
Fixed $46,130
Fixed manufacturing overhead $ 151,800 ($336,320)
Net Income (Loss) $6,360
<em>Part b</em>
Nelter Corporation
<u>Income statement for the month using absorption costing</u>
Sales ($ 122 x 6,590) $803,980
Less Cost of Goods Sold
Beginning Inventory $26,970
Add Cost of Goods Manufactured $613,800
Less Ending Inventory ($27,900) ($612,870)
Gross Profit $191,110
Less Expenses
Selling and administrative expense :
Variable ($21 x 6,590) $138,390
Fixed $46,130 ($184,520)
Net Income (Loss) $6,590
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Explanation:
<u>Variable Costing Calculations</u>
Unit Product Cost = Variable Manufacturing Costs
= $ 42 + $ 26 + $ 2
= $ 70
Cost of Goods Manufactured = 6,600 x $ 70 = $462,000
Opening Inventory = 290 x $ 70 = $20,300
Ending Inventory = 300 x $70 = $21,000
<u>Absorption Costing Calculations</u>
Unit Product Cost = Variable Manufacturing Costs
= $ 42 + $ 26 + $ 2 + ($ 151,800 ÷ 6,600)
= $ 42 + $ 26 + $ 2 + $23
= $93
Cost of Goods Manufactured = 6,600 x $93 = $613,800
Opening Inventory = 290 x $93 = $26,970
Ending Inventory = 300 x $93 = $27,900
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