Reference no: EM133123379
Question - New York Press produces textbooks for college courses. The recently hired General Manager, Ms. John Black has been told that she will be compensated based on her GAAP based absorption income. Based on past production levels, Ms. Black budgeted to produce 20,000 textbooks (which is about 80% of the available maximum capacity) and determined that the budgeted fixed production cost (manufacturing overhead) of $400,000 will be allocated (applied) at the pre-determined rate of $20 per book (==$400,000/20,000). In addition, the following information is available for the fiscal year ending December 2020:
Beginning Inventory 1000 books
Ending Inventory 6000 books
Variable production cost $40 per book
Fixed selling and administrative costs: $36,000
Actual sales 16,000 books
Average selling price $80 per book
Variable selling and administrative costs $24,000
The Variable production cost is inclusive of direct materials, direct labor, and variable manufacturing overhead. New York Press did NOT have any over/ under the application in variable manufacturing overhead. Further, the actual fixed manufacturing overhead was the same as the budgeted amount. Since, New York Press uses a Normal costing system, any over or under applied manufacturing overhead is adjusted to the cost of goods sold at year-end.
Required - Prepare the actual absorption cost (GAAP) income statement for the year ending December 2020.
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