exercise 19 - 10 (algo) absorption costing income statement lo p2\nhayek bikes prepares the income statement…

exercise 19 - 10 (algo) absorption costing income statement lo p2\nhayek bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. for its first month of operations, 375 bikes were produced and 225 were sold. income statement information under variable costing follows.\nsales (225×$1,725) $388,125\nvariable cost of goods sold (225×$675) 151,875\nvariable selling and administrative expenses (225×$65) 14,625\ncontribution margin 221,625\nfixed overhead 63,750\nfixed selling and administrative expenses 85,000\nincome $72,875\nprepare the companys income statement under absorption costing.\nhayek bikes\nincome statement (absorption costing)

exercise 19 - 10 (algo) absorption costing income statement lo p2\nhayek bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. for its first month of operations, 375 bikes were produced and 225 were sold. income statement information under variable costing follows.\nsales (225×$1,725) $388,125\nvariable cost of goods sold (225×$675) 151,875\nvariable selling and administrative expenses (225×$65) 14,625\ncontribution margin 221,625\nfixed overhead 63,750\nfixed selling and administrative expenses 85,000\nincome $72,875\nprepare the companys income statement under absorption costing.\nhayek bikes\nincome statement (absorption costing)

Answer

Explanation:

Step1: Calculate fixed overhead per unit

Fixed overhead per unit = Fixed overhead / Units produced Fixed overhead per unit = $63750 / 375 = $170

Step2: Calculate cost of goods sold under absorption costing

Variable cost of goods sold per unit = $675 Cost of goods sold per unit under absorption costing = $675 + $170 = $845 Cost of goods sold = 225 × $845 = $190125

Step3: Prepare absorption - costing income statement

Sales = $388125 Cost of goods sold = $190125 Gross margin = $388125 - $190125 = $198000 Selling and administrative expenses: Variable selling and administrative expenses = 225 × $65 = $14625 Fixed selling and administrative expenses = $85000 Total selling and administrative expenses = $14625 + $85000 = $99625 Income = $198000 - $99625 = $98375

Answer:

HAYEK BIKES
Income Statement (Absorption Costing)
Sales $388,125
Cost of goods sold $190,125
Gross margin $198,000
Selling and administrative expenses $99,625
Income $98,375