Problem:
JT Enterprises
Income Statement
For the quarter Ended March 31, 2005
Sales revenue (25,000 units) $1,200,000
Less Variable Costs:
Variable Costs of goods sold $540,000
Variable selling and admin expenses $260,000
Contribution Margin $800,000
Less Fixed costs:
Fixed manufacturing overhead $300,000
Fixed selling and administrative
expenses $150,000 $450,000
Net Loss $(50,000)
The variable costs of goods sold includes the costs of direct materials, direct labor, and variable manufacturing overhead. The company began the quarter with no inventory, it manufactured 30,000 units over the period. Variable selling and administrative expenses are based on units sold.
Q1. Calculate the unit product cost using absorption costing
Q2. Rework the income statement using absorption costing
Q3. Does the net loss figure change using absorption costing? If yes, explain why
Q4. During the second quarter of operations, JT again manufactured 30,000 units but sold and absorption-costing methods
Q5. Explain the difference in net income (or loss) in the second quarter between the two statements prepared in requirement (D).