Question

Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 350 bikes were produced and 225 were sold; this left 125 bikes in ending inventory. The income statement information under variable costing follows. Sales (225 × $1,625) $ 365,625Variable product cost (225 × $675) 151,875Variable selling and administrative expenses (225 × $65) 14,625Contribution margin 199,125Fixed overhead cost 63,000Fixed selling and administrative expense 95,000Net income $ 41,1251. Prepare this company's income statement for its first month of operations under absorption costing. (Round your intermediate calculations to the nearest whole dollar.)

Answer 1

Answer:

Under absorption costing ,net operating income = $63625

Explanation:

    Cost per unit:

   Variable cost per unit = 675  per unit (a)

 Fixed cost per unit    = Fixed overhead cost /uits produced = 63000/350

                                   = 180 per unit     (b)

Total cost per unit =  (a)+(b)= 675+180= 855 per unit                        

       

                                        Hayek Bikes

                                       Income statment

                                 ( Absorption costing)

                                                                                                                 $

Sales (225 * 1625)                                                                             =  365625

less: Cost of goods sold:

       (225 * 855)                                                                                   = (192375)

                               Gross profit                                                             173250

Less: variable selling and administraive expense  14625

          Fixed selling and admintrative expense      95000  

                                                                                                              =(109625)

                Net operating income                                                            63625