Trebowski Company prepared the following absorption-costing income statement for the first year of operations. The income statement is for the fiscal year ended May 31, 2015:
Sales (16,000 units) $320,000
Cost of Goods Sold 216,000
Gross Margin 104,000
Selling and administrative expenses 46,000
Operating income $58,000
Additional data follow:
Variable selling and administrative expenses $1.50 per unit
Variable manufacturing costs $11.00 per unit
Direct materials inventory, May 31, 2015 0
Work-in-process inventory, May 31, 2015 0
Units produced 17,500 units
Units expected to be produced 17,500 units
Required:
Assume actual fixed costs were equal to budgeted fixed costs. Prepare a variable-costing income statement for the year ended May 31, 2015.
Sales $320,000
Variable expenses:
Manufacturing cost of goods sold ($11 × 16,000 ) 176,000
Selling and administrative expenses ($1.50 × 16,000 ) 24,000
Contribution margin 120,000
Fixed expenses:
Fixed factory overhead (17,500 × $40,000/16,000 ) 43,750
Fixed selling and administrative expenses 22,000
Operating income $54,250
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