aces incorporated, a manufacturer of tennis rackets, began operations this year. the company produced 5,500…

aces incorporated, a manufacturer of tennis rackets, began operations this year. the company produced 5,500 rackets and sold 4,400. each racket was sold at a price of $85. fixed overhead costs are $68,750 for the year, and fixed selling and administrative costs are $64,700 for the year. the company also reports the following per - unit variable costs for the year.\ndirect materials: $11.85\ndirect labor: $7.85\nvariable overhead: $4.80\nvariable selling and administrative expenses: $1.50\nrequired:\nprepare an income statement under absorption costing.\naces incorporated\nincome statement (absorption costing)

aces incorporated, a manufacturer of tennis rackets, began operations this year. the company produced 5,500 rackets and sold 4,400. each racket was sold at a price of $85. fixed overhead costs are $68,750 for the year, and fixed selling and administrative costs are $64,700 for the year. the company also reports the following per - unit variable costs for the year.\ndirect materials: $11.85\ndirect labor: $7.85\nvariable overhead: $4.80\nvariable selling and administrative expenses: $1.50\nrequired:\nprepare an income statement under absorption costing.\naces incorporated\nincome statement (absorption costing)

Answer

Explanation:

Step1: Calculate total sales

Total sales = Selling - price per unit×Number of units sold. So, $85×4400 = 374000$.

Step2: Calculate total variable cost per unit

Total variable - cost per unit=Direct materials+Direct labor+Variable overhead+Variable selling and administrative expenses. So, $11.85 + 7.85+4.80 + 1.50=26$.

Step3: Calculate total variable cost

Total variable cost = Total variable - cost per unit×Number of units sold. So, $26×4400 = 114400$.

Step4: Calculate fixed manufacturing overhead per unit

Fixed manufacturing overhead per unit=$\frac{Fixed\ overhead\ costs}{Number\ of\ units\ produced}=\frac{68750}{5500}=12.5$.

Step5: Calculate cost of goods sold

Cost of goods sold=(Total variable - cost per unit+Fixed manufacturing overhead per unit)×Number of units sold. So, $(26 + 12.5)×4400=38.5×4400 = 169400$.

Step6: Calculate gross margin

Gross margin = Total sales−Cost of goods sold. So, $374000−169400 = 204600$.

Step7: Calculate total fixed selling and administrative costs

Total fixed selling and administrative costs = 64700.

Step8: Calculate net operating income

Net operating income = Gross margin−Total fixed selling and administrative costs. So, $204600−64700 = 139900$.

Particulars Amount
Sales $374000$
Cost of Goods Sold $169400$
Gross Margin $204600$
Fixed Selling and Administrative Expenses $64700$
Net Operating Income $139900$

Answer:

Particulars Amount
Sales $374000$
Cost of Goods Sold $169400$
Gross Margin $204600$
Fixed Selling and Administrative Expenses $64700$
Net Operating Income $139900$