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Absorption costing income statement

SoySun manufactures and sells premium soy milk by the gallon. SoySun just finished its first year of operations. The following data relates to this first year:

Number of gallons produced 75,000
Number of gallons sold 70,000
Sales price $3.00 per gallon
Unit product cost under variable costing $1.45 per gallon
Total contribution margin $84,000
Total fixed manufacturing overhead cost $63,000
Total fixed selling and administrative expense $10,500


Using the absorption costing method, prepare SoySun's Income Statement for the year.

Solution Preview

Under absorption costing, the fixed manufacturing overhead is also included in the inventory. The total fixed manufacturing overhead is 63,000. Number of gallons produced is 75,000
Fixed manufacturing cost / gallon = 63,000/75,000=$0.84
The manufacturing cost under absorption ...

Solution Summary

The solution explains how to prepare an income statement under the absorption costing method