Question

Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 5,300 rackets and sold 4,200. Each racket was sold at a price of $83. Fixed overhead costs are $65,190, and fixed selling and administrative costs are $64,500. The company also reports the following per unit variable costs for the year: Variable product costs $24.38Variable selling and administrative expenses $1.38 Prepare an income statement under absorption costing.

Answer 1

Answer:

Net operating profit= $124,248

Explanation:

Giving the following information:

The company produced 5,300 rackets and sold 4,200.

Each racket was sold for $83.

Fixed overhead costs are $65,190

Fixed selling and administrative costs are $64,500.

The company also reports the following per unit variable costs for the year:

Variable product costs $24.38

Variable selling and administrative expenses $1.38

Under absorption costing the fixed overhead is included in the product costs.

Unitary fixed overhead= 65190/5300= $12.3

Cost of goods sold= 4200*(24.38 + 12.3)= 154,056

Income statement:

Sales= 4200*83= $348,600

COGS= 154,056

Gross profit= 194,544

Selling and administrative expense= 64500 + (4200*1.38)= $70296

Net operating profit= $124,248