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:

Well-Sorted Sandstone

Sandstone comprised of grains that are uniform in size, indicating a specific and consistent energy environment during deposition.

Dark Porous

Referring to rocks that have a dark color and contain numerous small holes or pores.

Lichens

Symbiotic organisms made up of a fungus and either an algae or a cyanobacteria, living together and often found on rocks, trees, and soil.

Oxalic Acid

A strong organic acid found in many plants and vegetables, commonly used as a cleaning agent and rust remover.