Question

Absorption and Variable Costing Comparisons Red Arrow Blueberries manufactures blueberry jam. Because of bad weather, its blueberry crop was small. The following data have been gathered for the summer quarter of last year: Beginning inventory (cases) 0 Cases produced 8,000 Cases sold 7,000 Sales price per case $ 115 Direct materials per case $ 25 Direct labor per case $ 40 Variable manufacturing overhead per case $ 10 Total fixed manufacturing overhead $ 192,000 Variable selling and administrative cost per case $ 2 Fixed selling and administrative cost $ 38,000 Functional Income Statement Contribution Income Statement Ending Inventory Analysis (a) Prepare a functional income statement for the quarter using absorption costing. (Round answers to the nearest dollar. Do not use negative signs with your answers, EXCEPT if you calculate a net loss.) RED ARROW BLUEBERRIES Functional (Absorption Costing) Income Statement For the Summer Quarter (Last Year) Sales Answer 805,000 Cost of goods sold: Variable costs Answer 616,000 Fixed costs Answer 192,000 Goods available Answer 808,000 Ending inventory Answer 99,000 Answer 693,000 Gross profit Answer 112,000 Operating expenses: Variable selling and administrative Answer 14,000 Fixed selling and administrative Answer 38,000 Answer 52,000 Net income (loss) Answer 60,000

Answer 1

Answer:

Red Arrow Blueberries

RED ARROW BLUEBERRIES Functional (Absorption Costing) Income Statement For the Summer Quarter (Last Year)

Sales                                           $805,000

Cost of goods sold:

Variable costs              600,000

Fixed costs                   192,000

Goods available          792,000

Ending inventory          99,000   693,000

Gross profit                                    112,000

Operating expenses:

Variable selling & administrative  14,000

Fixed selling and administrative  38,000

Total operating expenses           52,000

Net income (loss)                        60,000

Explanation:

a) Data and Calculations:

Beginning inventory (cases)   0

Cases produced              8,000

Cases sold                       7,000

Ending inventory (cases) 1,000 (8,000 - 7,000)

Sales price per case $ 115

Direct materials per case $ 25

Direct labor per case $ 40

Variable manufacturing overhead per case $ 10

Total fixed manufacturing overhead $ 192,000

Variable selling and administrative cost per case $ 2

Fixed selling and administrative cost $ 38,000

Variable costs:

Direct materials per case         $ 25

Direct labor per case                $ 40

Variable manufacturing

 overhead per case                 $ 10

Total variable cost per case    $ 75

Total variable costs = $600,000 ($75 * 8,000)

Ending cost of