Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,200 rackets and sold 5,100. Each racket was sold at a price of $92. Fixed overhead costs are $81,840 and fixed selling and administrative costs are $65,400. The company also reports the following per unit costs for the year: Variable production costs$25.20
Variable selling and administrative expenses$2.20

Required:
Prepare an income statement under variable costing.

income statement under variable costing.

Sales (5,100 × $92)                                                                             $469,200

Less Cost of Sales :

Opening Inventory                                                                 $0

Add Cost of Goods Manufactured (6,200 × $ 25.20)    $156,240

Less Closing Inventory (1,100 × $ 25.20)                         ($27,720) ($128,520)

Contribution                                                                                         $340,680

Less Expenses:

Fixed overhead costs are                                                                    ($81,840)

fixed selling and administrative costs                                                ($65,400)

Variable selling and administrative expenses ($ 2.20×5,100)           ($11,220)

Net Income / (loss)                                                                                $182,220

Explanation:

Only the Variable production costs are included as cost of goods sold expense.

Both the Non - Manufacturing expenses (Selling and Administrative) and Fixed Manufacturing Overhead are treated as period cost under variable costing.

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whole quiz

1. the sum of all activities involved in getting high-quality products into the marketplace

2.operations

3. the principle of looking at the supply chain as a whole in order to improve the overall flow through the system.

4. produced; performed

5. activities producing tangible products, such as radios, newspapers, buses, and textbooks.

6. activities producing intangible and tangible products, such as entertainment, transportation, and education.

7.   customer focus

8. analyzing a competitor's products to identify desirable improvements

9. the systematic direction and control of the processes that transform resources into finished projects that create value for and provide benefits to consumers.

10. operation management.

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