Stonehenge Inc APrepare Stonehenge's December 31 Income Statement for the Current Year

question 155

Essay

Stonehenge Inc., a manufacturer of landscaping blocks, began operations on April 1 of the current year.During this time, the company produced 750,000 units and sold 720,000 units at a sales price of $9 per unit.Cost information for this period is shown in the following table:
$\begin{array}{ll}\text { Production costs }\\\quad\text { Direct materials } & \$ 1.80 \text { per unit } \\\quad\text { Direct labor } & \$ 30 \text { per unit } \\\quad\text { Variable overhead } & \$ 495,000 \text { in tota } \\\quad\text { Fixed overhead } & \$ 450.000 \text { in tota }\\\text { Nonproduction costs }\\\quad\text {Variable selling and administrative }& \$ 18,000 \text {in total}\\\quad\text {Fixed selling and administrative }& \$ 53,000 \text { in total}\\\end{array}$ a.Prepare Stonehenge's December 31 income statement for the current year under absorption costing.
b.Prepare Stonehenge's December 31 income statement for the current year under variable costing.

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Definitions:

Product Structure

An organization structure that groups together people and jobs focused on a single product or service.

Market Demands

The total amount of a product or service that consumers in a market are willing and able to purchase at a given price.

Functional Structures

An organizational design that groups employees by their similar skills, resource uses, and expertise to perform work efficiently.

Cost Containment

Strategies or measures implemented to control, reduce, or maintain expenses within a given budget.