The Variable Costing Income Statement for Vamonos Company for 2018

question 15

Essay

The variable costing income statement for Vamonos Company for 2018 is as follows: $\begin{array}{lr}\text { Sales ( } 5,000 \text { units) }&&\$100,000\\\text { Variable expenses: }\\\text { Cost of goods sold } & \$ 30,000 \\\text { Selling }(10 \% \text { of sales) } & 10,000&40,000\\\text { Contribution margin }&&\$60,000\\\text { Fixed expenses: }\\\text { Manufacturing overhead } & \$ 24,000 \\\text { Administrative } & 14,400&38,400\\\text { Operating income }&& \$ 21,600\\\end{array}$

$\text { Selected data for } 2018 \text { concerning the operations of the company are as follows: }$

$\begin{array}{lr}\text { Beginning inventory } & -0 \text { - units } \\\text { Units produced } & 8,000 \text { units }\\\\\text { Minufacturing costs: }\\\text { Direct labor } & \$ 3.00 \text { per unit } \\\text { Direct materials } & 1.60 \text { per unit } \\\text { Variable overhead } & 1.40 \text { per unit }\end{array}$ Required:
Prepare an absorption costing income statement for 2018.

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Definitions:

Profits

The financial gain obtained when the revenue from business activities exceeds expenses, costs, and taxes.

Retained Earnings

The portion of net income that is kept within a company rather than distributed to shareholders as dividends.

Stock Market

A marketplace where securities such as stocks and bonds are bought and sold, providing companies with access to capital and investors with a slice of ownership in companies and potential income.

Government Bonds

Debt securities issued by a government to support government spending and obligations, typically offering a fixed rate of return over a certain period.