The annual data that follows pertain to
ShadyShady?,
a manufacturer of swimming goggles? (the company had nobeginning? inventory):
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Requirements
1. | Prepare both conventional? (absorption costing) andcontribution margin? (variable costing) income statements for ShadyShady for the year. |
2. | Which statement shows the higher operating? income? Why? |
3. | The company marketing vice president believes a new salespromotion that costs $135,000 would increase sales to205,000 goggles. Should the company go ahead with the?promotion? Give your reason. Sales price. . . . . . . . . . . . . . . . . . . . . . . . . . .. . $47 Variable manufacturing expense per unit. . . . $19 Sales commission expense per unit. . . . . . . . $12 Fixed manufacturing overhead. . . . . . . . . . . $1,640,000 Fixed operating expenses. . . . . . . . . . . . . . . $245,000 Number of goggles produced. . . . . . . . . . . . . . 205,000 Number of goggles sold. . . . . . . . . . . . . . . . . . 193,000 Shady Income Statement (Absorption Costing) For the Year Ended December 31 Less: Less: Operating expenses |
