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Sivan Co. manufactures and sells one product. For the year, they started with no opening
inventory; produced 100,000 units, but only sold 70,000 units. The selling price per each unit is
$60.
The variable costs per unit were:
Direct materials.........................7
Direct Labor .............................6
Variable manufacturing overhead ....5
Variable selling and administrative…6
Fixed costs per year:
Fixed manufacturing Overhead ................$700,000
Fixed Selling and Administrative expenses.. $300,000
(a) Prepare the Income Statement using Absorption Costing.
(b) Prepare the Income Statement using Variable Costing
Comment
Solution
Answer:-
Working Note 1:-
product manufactured = 1,00,000 units
variable price:
direct materail = $ 7
direct labour = $ 6
manufacturing exp = $ 5
toatl = $ 18
Income statement using Absorption costing
particular amount Total amount
sales ( 70000 * $ 80 ) $ 56,00,000
Less:- cost of good sold
Opening Inventory nil
manufactured goods ( 100000 * 25 ) (WN 1) $ 25,00,000
Closing stock ( 30000 * 25) ($ 7,50,000)
Cost of good sold $ 17,50,000
Gross profit $ 38,50,000
Less:- selling and admistraive expenses
variable expense ( 70000 * 25 ) $ 17,50,000
Fixed expense $ 3,00,000 $ 20,50,000
Net operating Income $ 18,00,000

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Sivan Co- manufactures and sells one product- For the year- they start.docx

  • 1. Sivan Co. manufactures and sells one product. For the year, they started with no opening inventory; produced 100,000 units, but only sold 70,000 units. The selling price per each unit is $60. The variable costs per unit were: Direct materials.........................7 Direct Labor .............................6 Variable manufacturing overhead ....5 Variable selling and administrative…6 Fixed costs per year: Fixed manufacturing Overhead ................$700,000 Fixed Selling and Administrative expenses.. $300,000 (a) Prepare the Income Statement using Absorption Costing. (b) Prepare the Income Statement using Variable Costing Comment Solution Answer:- Working Note 1:- product manufactured = 1,00,000 units variable price: direct materail = $ 7 direct labour = $ 6 manufacturing exp = $ 5 toatl = $ 18
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