[lindslu]

Please can someone help with writing this out so I can understand in the future! Thanks!


On January 1 of the current year, C.F. Hartley Company commenced operations. It operated its plant at 100% of capacity during January. The following data summarized the results for January:





Units



Production 25,000

Sales ($18 per unit) 21,000

Inventory on January 31 4,000



Total Cost or Expense

Manufacturing Costs:

Variable $ 287,500

Fixed 75,000

Total $ 362,500



Selling & Administrative Expense:

Variable $ 16,800

Fixed 10,500

Total $ 27,300



A.) Prepare an income statement using the absorption costing method.

B.) Prepare an income statement using the variable costing method.

[shalaby]

1) absorption costing method

Sales: 378,000 {21000*18}
-COGS (304,500) {25000-4000}*{287500+75000}/{25000}

=Gross profit 73500
-S&A expenses (27300) {16,800+10,500}

=EBIT 46200 operating Income
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2)variable costing method

Sales 378,000
-Variable COGS (241,500) {287,500/25000*21000}

=Manufacturing Contribution margin 136500
-Variable S&A expenses 16,800)

=Contribution Margin 119700
-FOH (75,000)
-Fixed S&A expenses (10,500)

=operating Income 34200 EBIT
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Note: operating Incomes are different in both methods, If you don't know why, you could ask if you want to know.

best regads