Answer to Question #115246 in Financial Math for Erick

Question

Prepare the income statement for the month ended 31 August 2020 using the absorption costing method.
Given Estimated production 5000 units
Estimated sales 4500 units
Variable manufacturing R550
Fixed manufacturing over heads R 300 000
Fixed costs R150 000
Variable Cost per watch Sold R100
Selling price per watch R900

Answer 1

Income Statement(Absorption costing}

For the month ended 31^st August 2020.

Sales(4500*900) 4,050,000

Less variable manufacturing cost cost (5000 *550) (2,750,000)

Less variable selling cost(4500*100) (450,000)

Operating profit 850,000

Less manufacturing overheads (300,000)

Less fixed cost (150,000}

Net profit 400,000