Absorption and Variable Costing Comparisons: SalesExceed Production
Wright Development purchases, develops, and sells commercialbuilding sites. As the sites are sold, they are cleared at anaverage cost of $2,500 per site. Storm drains and driveways arealso installed at an average cost of $5,500 per site. Selling costsare 10 percent of sales price. Administrative costs are $420,000per year. During 2016, the company bought 1,000 acres of land for$5,000,000 and divided it into 200 sites of equal size. The averageselling price per site was $85,000 during 2016 when 50 sites weresold. During 2017, the company purchased and developed another1,000 acres, divided into 200 sites. The purchase price was again$5,000,000. Sales totaled 300 sites in 2017 at an average price of$85,000.
Required a. Prepare 2016 and 2017 functionalincome statements using absorption costing.
Use a negative sign only to indicate anet loss for income. Otherwise, do not usenegative signs with your answers.
| Wright Development |
|---|
| Functional Income Statements |
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| For the Years 2016 and 2017 |
|---|
| 2016 | 2017 |
|---|
| Sales | $Answer | $Answer |
| Cost of sales | Answer | Answer |
| Gross profit | Answer | Answer |
| Selling and administrative expenses: | Answer | Answer |
| Net income (loss) | $Answer | $Answer |
b. Prepare 2016 and 2017 contribution income statements usingvariable costing.
Use a negative sign only to indicate anet loss for income. Otherwise, do not usenegative signs with your answers.
| Wright Development |
|---|
| Contribution Income Statements |
|---|
| For the Years 2016 and 2017 |
|---|
| 2016 | 2017 |
|---|
| Sales | $Answer | $Answer |
| Variable costs | Answer | Answer |
| Contribution margin | Answer Incorrect
Mark 0.00 out of 1.00 | Answer |
| Fixed expenses | Answer | Answer |
| Net income (loss) | $Answer | $Answer |
