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1. Prepare an income statement for the year using variable costing.
2. Prepare an income statement for the year using absorption costing.

1. Prepare An Income Statement For The Year Using Variable Costing.2. Prepare An Income Statement For

Answers

Answer 1

The income statements are created below.

PART 1:

SIMS COMPANY  

Variable Costing Income Statement  

Sales                                      (75000*350)  26250000

Less Variable costs  

Direct materials (75000*35) 2625000

Direct Labor (75000*55) 4125000

Variable overhead costs (75000*30) 2250000

Variable selling and administrative expenses 750000

 

Total variable costs  9750000

Contribution margin  16500000

Less: Fixed expenses  

Fixed selling and administrative coosts 4500000

Fixed overhead costs 7350000

 

Total fixed expenses 11850000

Net income(loss) $4650000

PART 2:

SIMS COMPANY  

Absorption Costing Income Statement  

Sales (75000*350)  26250000

Less: Cost of goods sold  

Direct materials (75000*35) 2625000

Direct labor (75000*55) 4125000

Variable overhead costs (75000*30) 2250000

Fixed overhead costs (7350000/105000*75000) 5250000

 

Cost of goods sold  14250000

Gross margin  12000000

Selling general and administrative expenses  

Fixed selling and administrative costs 4500000

Variable selling and administrative exepenses 750000

 

Total selling, general and administrative expenses 5250000

Net income (loss) $6750000

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