Question

The following data are from the accounting records of Niles Castings for year 2: Units produced and sold 80,000 Total revenues and costs Sales revenue $ 270,000 Direct materials costs 63,000 Direct labor costs 33,000 Variable manufacturing overhead 18,000 Fixed manufacturing overhead 41,000 Variable marketing and administrative costs 11,500 Fixed marketing and administrative costs 38,000Required:a. Prepare a gross margin income statement.b. Prepare a contribution margin income statement

Answer 1

Answer:

Gross Margin = $ 115,000 Contribution Margin= $ 144,500

Explanation:

Nile Castings

Income Statement

Year 2

Sales Revenue                                                           $ 270,000

Direct Materials                                                            $63,000

Direct Labor                                                                 $ 33,000

Variable Manufacturing Overheads                            $ 18,000

Fixed Manufacturing Costs                                          $ 41,000

Gross Margin                                                                $ 115,000

Less Marketing & Administrative Costs

Fixed Marketing Costs                                                 $ 38,000

Variable Marketing Costs                                           $ 11,500

Net Profit                                                                    $ 65,500

Nile Castings

Income Statement Under Absorption Method

Year 2

Sales Revenue                                                           $ 270,000

Direct Materials                                                            $63,000

Direct Labor                                                                 $ 33,000

Variable Manufacturing Overheads                            $ 18,000

Variable Marketing & Administrative Costs               $ 11,500

Contribution Margin                                                  $ 144,500

Less Fixed Costs

Fixed Manufacturing Costs                                       $ 41,000

Fixed Marketing Coss                                                $ 38,000

Net Profit                                                                    $ 65,500