Question

Aces Inc., a manufacturer of tennis rackets, began operations this year. The company produced 6,000 rackets and sold 4,900. Each racket was sold at a price of \(90. Fixed overhead costs are \)78,000, and fixed selling and administrative costs are \(65,200. The company also reports the following per unit variable costs for the year. Prepare an income statement under absorption costing.

Variable product costs \)25.00

Variable selling and administrative expenses 2.00

Short answer

Net income of the company is$179,800.

Step-by-step solution

Meaning of Gross Profit

Gross profit denotes the amount of profit left with the company after making the payments of all the costs associated with the sales process of the business. It is computed after deducting thecost of goods sold from thenet sales revenues.

 Step 2: Preparation of income statement 

Aces Inc.
Absorption Costing Income Statement
Particulars	Details	Amounts ($)
Sales	(4900*90)	441,000
Less: Cost of goods sold
Variable production costs	(4900*25)	122,500
Fixed overhead cost	(78000/6000)*4900	63,700
Gross profit		254,800
Less: Operating expenses
Fixed selling and administrative costs		65,200
Variable selling and administrative cost	(4900*2)	9,800
Net income		$179,800