Answer:
(a) Profit = $134,000
(b) Profit = $159,500
(c) Profit = $83,000
Explanation:
According to the scenario, calculation are as follows:
Variable cost of goods sold = Total variable production cost + fixed OH per unit
= ( $7 + $15 + $8) + ( $100,000 ÷ 8,000)
= $30 + $12.5
= $42.5
So, Absorption costing income statement are as follows:
(a) Production is 8,000 units and sales are 8,000 units
Sales = 8,000 × $70 = $560,000
Less: Variable expense
Variable cost of goods sold = 8,000 × $42.5 = 340,000
Less : Variable selling and admin expense
Variable selling and admin expense = 8,000 × $2 = $16,000
Fixed selling expense = $70,000
Profit = $134,000
(b) Production is 8,000 units and sales are 9,000 units
Sales = 9,000 × $70 = $630,000
Less: Variable expense
Variable cost of goods sold = 9,000 × $42.5 = $382,500
Less : Variable selling and admin expense
Variable selling and admin expense = 9,000 × $2 = $18,000
Fixed selling expense = $70,000
Profit = $159,500
(c) Production is 8,000 units and sales are 6,000 units
Sales = 6,000 × $70 = $420,000
Less: Variable expense
Variable cost of goods sold = 6,000 × $42.5 = $255,000
Less : Variable selling and admin expense
Variable selling and admin expense = 6,000 × $2 = $12,000
Fixed selling expense = $70,000
Profit = $83,000
