Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Units produced 25,000
Units sold 22,000
Variable costs per unit:
Direct materials $ 7.20
Direct labor $ 2.90
Variable manufacturing overhead $ 1.60
Variable selling and administrative $ 7.90
Fixed expenses:
Fixed manufacturing overhead 212,500
Fixed selling and administrative 219,000
<u>Under absorption costing, the fixed manufacturing costs get allocated to the product cost. The cost of goods sold is now composed of direct material, direct labor, variable overhead, and unitary fixed overhead.</u>
<u>First, we need to calculate the unitary fixed overhead and then the total unitary cost.</u>
<u />
<u>Unitary fixed costs= 212,500/25,000= $8.5 per unit</u>
<u />
Unitary cost= 7.2 + 2.9 + 1.6 + 8.5= $20.2
Now, we can recalculate the income statement:
Sales= 22,000*$36.3= 798,600
COGS= (22,000*20.2)= (444,400)
Gross profit= 354,200
Variable selling and administrative= (7.90*22,000)= (173,800)
Fixed selling and administrative= (219,000)
Net operating profit= (38,600)
<u>It doesn't show a profit, but at least the loss is smaller. </u>
