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.

Question

Business

Valery Downs

10 April, 10:00

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.

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Kason Holden · Answer 1

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