Sales $2,150,000 Manufacturing costs: Direct materials $960,000 Direct labor 420,000 Variable manufacturing cost 156,000 Fixed manufacturing cost 288,000 1,824,000 Selling and administrative expenses: Variable $204,000 Fixed 96,000 300,000 Required: 1. Prepare an income statement based on the absorption costing concept.

Net income                                                       26,000

Explanation:

Absorption costing classifies costs as production cost and non-production costs ( selling and distibution , administration e.t.c)

Income statement using Absorption costing

                                                                          $

Sales Revenue                                        2,150,000

Less cost of goods sold

Direct material                         960,000

Direct labour cost                   420,000

Variable manufacturing           156,000

Fixed manufacturing                288,000

production cost                                          ( 1,824,000 )

Gross profit                                                  326,000

Selling and distribution

Variable                                   204,000                

Fixed                                          96,000    

                                                                     (300,000)

Net income                                                       26,000

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