Question
Panama Ltd is a manufacturer of a single product. The company prepares its financial statements using, absorption costing. The company's revenues and expenses for the last two months are given below
Panama Ltd Comparative Income Statements For the Months of April and May
|
Production in units
|
|
|
|
4,800
|
5,000
|
|
Saks in units
|
4,500
|
5,250
|
|
Sales revenue
|
$630,000
|
$735,000
|
|
Less cost of goods sold (Mixed expense)
|
297,000
|
344,520
|
|
Gross Map
|
333,000
|
390,480
|
|
Less operating expenses:
|
|
|
|
Shipping expense (Mixed expense)
|
56,000
|
63,500
|
|
Salaries and commissions (Mixed expense, fixed component $30,500)
|
143,000
|
161,750
|
|
Other freed expenses
|
73.000
|
73.000
|
|
Total operating expenses
|
272,000
|
298,250
|
|
Net :tome
|
$ 61000
|
$92230
|
Additional information:
Regaining inventory for April in units: 0
June production in units: 6,400
June sales in units: 6,000
Fixed production costs per month: $48,000; Variable production costs per sit: $56
Required:
1. Separate the shipping expense into its variable and fixed components. State the cost formula for shipping expense.
2. Prepare an income statement for the month of June using the same format as the April and May statements and assuming no cloves in fixed costs.
3. Recast the May income statement using a variable costing format.