Ewing Company Planned to Be in Operation for Three Years

question 55

Essay

Ewing Company planned to be in operation for three years.During the first year, it had no sales but incurred $120,000 in variable manufacturing expenses and $40,000 in fixed manufacturing expenses.In the next year, it sold half of the finished goods inventory from the previous year for $100,000 but it had no manufacturing costs.In the third year, it sold the remainder of the inventory for $120,000, had no manufacturing expenses and went out of business.Marketing and administrative expenses were fixed and totalled $20,000 each year.Required:
a.Prepare an income statement for each year using absorption costing in the gross margin format.
b.Prepare an income statement for each year using variable costing contribution margin format.

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Definitions:

Intrinsic Motivation

The drive to engage in an activity for its own sake and personal rewards, rather than for external rewards.

Basic Human Needs

Fundamental requirements necessary for individuals to live a healthy and well-adapted life, such as food, water, shelter, safety, and belonging.

Competence

The ability or skillset required to efficiently perform or complete a specific task or job.

Self-determination

The process by which an individual controls their own life, making choices and decisions based on their own preferences and interests rather than being influenced by external forces.