Blatt Company, a manufacturer of slippers, began operations on June 1 of the current year. During this time, the company produced 210,000 units and sold 185,000 units at a sales price of $40 per unit. Cost information for this period is shown in the following table:Production costs? Direct materials$5.00 per unit Direct labor$4.75 per unit Variable overhead$302,000 in total Fixed overhead$405,000 in totalNon-production costs? Variable selling and administrative$9,000 in total Fixed selling and administrative$25,000 in totala. Prepare Blatt's December 31st income statement for the current year under absorption costing.b. Prepare Blatt's December 31st income statement for the current year under variable costing.
What will be an ideal response?
a.
| Blatt COMPANY Income Statement (Absorption Costing) For the seven months ended December 31, xx | |
| Sales (185,000 × $40) | $7,400,000 |
| Cost of goods sold (185,000 × $13.12*) | 2,427,200 |
| Gross margin | 4,972,800 |
| Selling and administrative expenses ($9,000 + $25,000) | 34,000 |
| Net income | $4,938,800 |
| *$5 + $4.75 + ($302,000/210,000) + ($405,000/210,000) = $13.12 |
| Blatt COMPANY Income Statement (Variable Costing) For the seven months ended December 31, xx | |
| Sales (185,000 × $40) | $7,400,000 |
| Variable expenses | ? |
| Variable production costs (185,000 × $11.19*) | 2,070,150 |
| Variable selling and administrative | 9,000 |
| Contribution margin | 5,320,850 |
| Fixed expenses | ? |
| Fixed overhead | 405,000 |
| Fixed selling and administrative expenses | 25,000 |
| Net income | $4,890,850 |
| *$5 + $4.75 + ($302,000/210,000) = $11.19 |
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