Dvorak Company produces a product that requires five standard pounds per unit. The standard price...

Question:

Dvorak Company produces a product that requires five standard pounds per unit. The standard price is $2.50 per pound. Assume the company produced 1,000 units of product. 1,000 units required 4,500 pounds, which were purchased at $3.00 per pound. The product requires three standard hours per unit at a standard hourly rate of $17 per hour. The 1,000 units required 2,800 hours at an hourly rate of $16.50 per hour. The standard variable overhead cost per unit is $1.40 per hour. The actual variable factory overhead was $4,000. The standard fixed overhead cost per unit is $0.60 per hour at 3,500 hours, which is 100% of normal capacity.

Prepare a 2014 income statement through gross profit for Dvorak Company. Assume Dvorak sold 1,000 units at $90 per unit.

Income Statement

The income statement is prepared to compute the profitability of a particular period. This statement is made to report the profits and losses over a specific period of time. The income statement is a part of the financial statements of the business.

Answer and Explanation:


Sales (1,000 * $90) $90,000
Cost of goods sold (1,000 * 5 * $2.50) + (1,000 * 3 * $17) + (1,000 * 3 * ($1.40 + $0.60)) $69,500
Gross profit at standard $20,500
Favorable Unfavorable
Less: Variances from standard cost
Direct materials price (4,500 * ($2.50 - $3)) $2,250
Direct materials quantity ($2.50 * (5,000 - 4,500)) $1,250
Direct labor rate (2,800 hrs * ($17 - $16.50)) $1,400
Direct labor efficiency ($17 * (3,000 - 2,800)) $3,400
Factory overhead controllable (($1.40 * (1,000 * 3) - $4,000)) $200
Factory overhead volume ($0.6*((1,000 * 3 hrs) - 3,500 hrs)) $300 $3,700
Gross profit ($20,500 + $3,700) $24,200

Learn more about this topic:

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What Is an Income Statement? - Purpose, Components & Format

from Accounting 101: Financial Accounting

Chapter 2 / Lesson 2
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