Answer:
a. Prepare a gross margin income statement.
Sales revenue $264,000
Less Cost of Goods Sold
Cost of Goods Manufactured ($163,000)
Gross Profit $101,000
Less Expenses :
Variable marketing and administrative costs ($13,600)
Fixed marketing and administrative costs ($32,000)
Net Income/ (Loss) $55,400
b. Prepare a contribution margin income statement.
Sales revenue $264,000
Less Cost of Goods Sold
Cost of Goods Manufactured ($119,000)
Contribution $145,000
Less Expenses :
Fixed manufacturing overhead ($44,000)
Variable marketing and administrative costs ($13,600)
Fixed marketing and administrative costs ($32,000)
Net Income/ (Loss) $55,400
Explanation:
<u>Manufacturing Costs Schedule - Absorption Costing</u>
Direct materials $68,000
Direct labor $34,000
Variable manufacturing overhead $17,000
Fixed manufacturing overhead $44,000
Total Manufacturing Costs $163,000
This is the costs of sales for gross margin income statement.
<u>Manufacturing Costs Schedule - Variable Costing</u>
Direct materials $68,000
Direct labor $34,000
Variable manufacturing overhead $17,000
Total Manufacturing Costs $119,000
This is the cost of sales for contribution margin income statement.
