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You have the following information regarding AJH Company: Sales 25,000 units per year at $45 per...

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Accounting

You have the following information regarding AJH Company:

Sales 25,000 units per year at $45 per unit

Production 30,000 units in 2004

At the beginning of 2004 there was no inventory.

Direct Materials are $12.00 per unit

Direct labor is $10.00 per unit

Variable manufacturing overhead costs are $8.00 per unit

Fixed manufacturing overhead costs are $150,000 per year

Marketing costs are all variable at $3.00 per unit

Administrative costs are all fixed at $75,000 per year

Required:

(a.) Prepare an income statement under absorption costing for2004

(b.) Prepare an income statement under variable costing for2004

(c.) Prepare an income statement under throughput costing for2004.

Answer & Explanation Solved by verified expert
3.7 Ratings (551 Votes)

Income statement for 2004 :
1 Absorption costing :
sales (25,000 units *45 per unit) 1125000
marginal cost of sales
direct materials (30,000 *12) 360000
direct labour (30,000*10) 300000
variable manufacturing overheads costs (30,000*8) 240000
fixed manufacturing overhead costs 150000 1050000
gross profit 75000
Marketing costs variable (30,000*3) 90000
administrative costs fixed 75000 165000
Net Profit/Loss -90000
2 Marginal costing:
sales (25,000 units *45 per unit) 1125000
Less:
marginal cost of sales
direct materials (30,000 *12) 360000
direct labour (30,000*10) 300000
variable manufacturing overheads costs (30,000*8) 240000
Marketing costs variable (30,000*3) 90000 990000
contribution 135000
Less:
fixed manufacturing overhead costs 150000
administrative costs fixed 75000 225000
Net Profit/Loss -90000
3 Throughput costing :
sales (25,000 units *45 per unit) 1125000
Less:
Cost of goods sold (30,000 *12) 360000
Throughput contribution 765000
Less:
direct labour (30,000*10) 300000
variable manufacturing overheads costs (30,000*8) 240000
fixed manufacturing overhead costs 150000
Marketing costs variable (30,000*3) 90000
administrative costs fixed 75000 855000
Net Profit/Loss -90000

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