Question

Appliance Apps has the following costs associated with its production and sale of devices that allow appliances to receive commands from cell phones. Beginning Inventory 0 Units Produced 25,000 Units Sold 20,000 Selling Price per Unit $144 Variable Sales and Administration Expenses $5 Fixed Sales and Administration Expenses $975,000 Direct Material Cost per Unit $25 Direct Labor Cost per Unit $11 Variable Manufacturing Overhead Cost per Unit $2 Fixed Manufacturing Overhead Cost per Month $977,500 Prepare an income statement under the absorption method. If an amount box does not require an entry, leave it blank.

Answer 1

Answer:

Appliance Apps

Income statement under the absorption method.

Sales                                                                                     $2,880,000

Less Cost of Sales

Beginning Inventory                                                0

Add Cost of Goods Manufactured                  $1,927,500

Less Ending Inventory                                      ($385,500) ($1,542,000)

Gross Profit                                                                            $1,338,800

Less Expenses

Variable Sales and Administration Expenses  $100,000

Fixed Sales and Administration Expenses       $975,000  ($1,075,000)

Net Income                                                                              $263,000

Explanation:

Units in Ending Inventory

Beginning Inventory             0

Add Units Produced       25,000

Available for Sale           25,000

Less Units Sold               20,000

Ending Inventory              5,000

Absorption Cost calculations

Product Cost = $77.10

Cost of Goods Manufactured = $1,927,500

Ending Inventory = $385,500