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ACCT 386 - Week 4 - Homework - Question 4

ACCT 386 - Week 4 - Homework - Question 4
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ACCT 386 - Week 4 - Homework - Question 4

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Question 4

Linden Company manufactures and sells a single product. Cost data for the product follow:

 

 

 

  Variable costs per unit:

 

 

      Direct materials

 

$6    

      Direct labor

 

12    

      Variable factory overhead

 

2    

      Variable selling and administrative

 

3    

 

 


  Total variable costs per unit

 

$23    

 

 



  Fixed costs per month:

 

 

      Fixed manufacturing overhead

$

135,000    

      Fixed selling and administrative

 

169,000    

 



  Total fixed cost per month

$

304,000    

 






    The product sells for $49 per unit. Production and sales data for May and June, the first two months of operations, are as follows:

 

Units
Produced

Units
Sold

  May

27,000     

23,000     

  June

27,000     

31,000     


    Income statements prepared by the accounting department, using absorption costing, are presented below:

 

May

June

  Sales

$

1,127,000    

$

1,519,000   

  Cost of goods sold

 

575,000    

 

775,000   

 





  Gross margin

 

552,000    

 

744,000   

  Selling and administrative expenses

 

238,000    

 

262,000   

 





  Net operating income

$

314,000    

$

482,000