- Basic Fitness Manufactures Exercise Bikes For Residential Customers Bikes Are Sold In Sports Stores Around The Country 1 (74.58 KiB) Viewed 9 times
a) Income statement for year 1 using variable costing
b) Income statement for year 1 using absorption costing
c) Projected income statement for year 2 using variablecosting
d) Projected income statement for year 2 using absorptioncosting
Basic Fitness manufactures exercise bikes for residential customers. Bikes are sold in sports stores around the country. John Fraser, the marketing manager, and Susan Goodyear, company president, are considering expanding customer base in the second year of operations to include department stores. Year 1 price to sports stores is $450 per bike. Year 2 selling price will be $400 per bike. Year 1 production was 3,200 bikes and sales were 3,200 bikes. As a result of additional sales in year 2 production is expected to be 5,000 bikes but due to uncertainty about department store sales, sales are expected to be 4,500. Manufacturing costs: Variable cost per unit Current Costs Direct materials Direct labour Variable overhead Fixed manufacturing cost Selling costs: Variable Fixed Projected cost for year 2 Manufacturing costs: Variable cost per unit Direct materials Direct labour Variable overhead Fixed manufacturing cost Selling costs: Variable Fixed $50.25 $62.35 $12.40 $80,000 20% of sales $60,000 $55.75 $65.45 $13.80 $120,000 20% of sales $80,000