Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,800 rackets and sold 5,700. Each racket was sold at a price of $98. Fixed overhead costs are $93,840 and fixed year selling and administrative costs are $66,000. The company also reports the following per unit costs for the Variable production costs Variable selling and administrative expensesS 280 $25.80 Required: Prepare an income statement under variable costing ACES INC

Answer and Explanation:

The preparation of an income statement under variable costing is shown below:-

                   Income statement under variable costing

                                        ACES INC

Sales                                                          $558,600

(5,700 × $98)

Less:

Cost of goods sold

Variable product cost            $147,060

($25.80 × 5,700)

variable selling administrative

expenses ($2.80 × 5,700)      $15,950

Less: Total variable cost                       $163,020

Contribution margin                              $395,580

Less: Fixed overhead cost                    $93,840

Less: Fixed and selling

administrative expenses                       $66,000

Net income                                             $235,740

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