Ace Products Sells Its Products for $22 Each

question 135

Essay

Ace Products sells its products for $22 each.Unit manufacturing costs are: direct materials, $4.00; direct manufacturing labour, $6.00; and variable manufacturing overhead, $3.00.Total fixed manufacturing overhead costs are $60,000 and marketing expenses are $2.00 per unit plus $20,000 per year.The current production level is 25,000 units although only 20,000 units are anticipated to be sold.Required:
a.Prepare an income statement using absorption costing in the gross margin format.
b.Prepare an income statement using variable costing in the contribution margin format.

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Definitions:

Acne Vulgaris

A skin condition characterized by inflammation of sebaceous glands and producing pimples.

Systemic Antibiotics

Medications used to treat bacterial infections that work by circulating throughout the body to target pathogens at various sites.

Collagen

The main structural protein found in skin and other connective tissues, vital for strength and elasticity.

Elastic Fibers

Protein fibers found in connective tissue that enable structures in the body, such as skin and blood vessels, to return to their original shape after being stretched or contracted.