Reference no: EM131800629

Question

Panama Ltd is a manufacturer of a single product. The company prepares its financial statements using, absorption costing. The company's revenues and expenses for the last two months are given below

Panama Ltd Comparative Income Statements For the Months of April and May

Production in units
	4,800	5,000
Saks in units	4,500	5,250
Sales revenue	$630,000	$735,000
Less cost of goods sold (Mixed expense)	297,000	344,520
Gross Map	333,000	390,480
Less operating expenses:
Shipping expense (Mixed expense)	56,000	63,500
Salaries and commissions (Mixed expense, fixed component             $30,500)	143,000	161,750
Other freed expenses	73.000	73.000
Total operating expenses	272,000	298,250
Net :tome	$ 61000	$92230

Additional information:

Regaining inventory for April in units: 0

June production in units: 6,400

June sales in units: 6,000

Fixed production costs per month: $48,000; Variable production costs per sit: $56

Required:

1. Separate the shipping expense into its variable and fixed components. State the cost formula for shipping expense.

2. Prepare an income statement for the month of June using the same format as the April and May statements and assuming no cloves in fixed costs.

3. Recast the May income statement using a variable costing format.