Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,200 rackets and sold 5,100. Each racket was sold at a price of $92. Fixed overhead costs are $81,840 and fixed selling and administrative costs are $65,400. The company also reports the following per unit costs for the year:

Variable production costs $ 25.20

Variable selling and administrative expenses $ 2.20

Required:

Prepare an income statement under variable costing.

income statement under variable costing.

Sales (5,100 * $92) $469,200

Less Cost of Sales:

Opening Inventory $0

Add Cost of Goods Manufactured (6,200 * $ 25.20) $156,240

Less Closing Inventory (1,100 * $ 25.20) ($27,720) ($128,520)

Contribution $340,680

Less Expenses:

Fixed overhead costs are ($81,840)

fixed selling and administrative costs ($65,400)

Variable selling and administrative expenses ($ 2.20*5,100) ($11,220)

Net Income / (loss) $182,220

Explanation:

Only the Variable production costs are included as cost of goods sold expense.

Both the Non - Manufacturing expenses (Selling and Administrative) and Fixed Manufacturing Overhead are treated as period cost under variable costing.