Williams Company Has Been Producing and Selling 100,000 Units Per

question 120

Essay

Williams Company has been producing and selling 100,000 units per year. They have excess capacity. The following budget was prepared for the next year: $\begin{array}{lc}\text { Selling price per unit } & \$ 1250 \\\text { Variable cost per unit: } & \\\text { Direct materials } & \$ 5.00 \\\text { Direct labor } & 3.00 \\\text { Overhead } & 1.00 \\\text { Selling and administrative } & 25\end{array}$ Fixed costs in total:
Overhead $\quad\quad\$ 80,000$
Sellingand administrative $\quad 35,000$ Required:
a. Prepare an income statement using the contribution approach.
b. Prepare an income statement using the absorption approach.

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Definitions:

Coupon Rate

The interest rate that an issuer of a bond agrees to pay to the holder of the bond, expressed as a percentage of the bond's face value.

Cost of Debt

the effective rate that a company pays on its current debt.

Coupon Rate

The interest rate paid by bond issuers on the bond's face value.