Snowy Mountain Company has the following selected data for the past year: Units sold during year 30,000 Units produced during year 45,000 Units in ending inventory 15,000 Variable manufacturing cost per unit $4.50 Fixed manufacturing overhead (in total) $20,250 Selling price per unit $12.00 Variable selling and administrative expense per unit $1.00 Fixed selling and administrative expenses (in total) $4,000 There were no units in beginning inventory. Complete the following: Prepare an income statement for last year using absorption costing. Show your work for credit (i. e., COGS

Instructions are listed below.

Explanation:

Given the following information:

Units sold during year 30,000

Units produced during year 45,000

Variable manufacturing cost per unit $4.50

Fixed manufacturing overhead (in total) $20,250

Selling price per unit $12.00

Variable selling and administrative expense per unit $1.00

Fixed selling and administrative expenses (in total) $4,000

Under the absorption costing method, the cost of goods sold includes the fixed manufacturing cost.

First, we need to calculate the unitary product cost:

Unitary product cost= variable cost per unit + unitary fixed manufacturing cost

Unitary product cost= 4.5 + (20,250/45,000)= $4.95

Now, we will do the income statement:

Sales= 30,000*12= 360,000

Cost of goods sold= 4.95*30,000= (148,500)

Gross profit= 211,500

Variable selling and administrative expense= (1.00*30,000)= (30,000)

Fixed selling and administrative expenses= (4,000)

Net operating income= 177,500