Answer:
Answer is explained below:
Explanation:
Solution A:
Townsend Co.
Income Statement - Absorption costing
For the Year ended 31 january
Sales (42000*$18) $7,56,000
Less: Cost of goods sold:
Variable manufacturing cost ($575000/50000*42000) $4,83,000
Fixed Manufacturing Overhead ($80000/50000*42000) $67,200
Cost of goods sold $5,50,200
Gross profit $2,05,800
Less: Selling and admin. Expense:
Variable Selling and Administrative Expenses $35,000
Fixed Selling & Administrative Expenses $10,500
Total selling and admin costs $45,500
Net Income $1,60,300
Solution B:
Townsend Co.
Income Statement - variable costing
For the Year ended 31 janaury
Sales (42000*$18) $7,56,000
Less: Variable Cost:
Variable manufacturing cost ($575000/50000*42000) $4,83,000
Variable Selling and Administrative Expenses $35,000
Total Variable Costs $5,18,000
Contribution Margin $2,38,000
Less: Fixed Costs:
Fixed Manufacturing Overhead $80,000
Fixed Selling & Administrative Expenses $10,500
Total Fixed Costs $90,500
Net Income $1,47,500
