Equili produces high end bottled water. Each of its 500 ml bottled water is sold at...
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Equili produces high end bottled water. Each of its 500 ml bottled water is sold at $5. Equili has been listed in the stock exchange since 2008, which means that Equili is required to produce financial statements according to the accounting standard. Following are the income statement produced by Equili for 2020 and 2021 as per accounting standard: 2020 ($ 000) 2021 ($ 000) Revenue Cost of Goods Sold Beginning inventory Cost of manufacturing Ending inventory Cost of Goods Sold Gross Margin Marketing Expenses General and Admin Expenses Operating Income 55,000 60,000 3,000 36,000 39,000 (3,000) (6,000) 33.000 36.000 22,000 24,000 13,000 14,000 4.500 4.500 4,500 5,500 In 2020 and 2021, Equili applied standard cost of $2 variable cost and allocate s1 of fixed manufacturing overhead cost per bottled water. Schedule of production shows that Equili produced 12,000,000 and 13,000,000 bottles of water in 2020 and 2021 respectively. Total fixed manufacturing overhead cost are $12,000,000 in 2020. In 2021, due to increasing rental price, fixed manufacturing overhead cost are $13,000,000. The fixed manufacturing overhead cost are allocated based on the number of units produced in the period. The marketing expenses consist of $2,000,000 fixed salary cost and the remaining cost are variable based on the number of bottled waters sold. Required: 1. Prepare operating income statement for 2020 and 2021 using Variable Costing method (10%) 2. Reconcile (mumerically) and explain the difference in the operating income under the two different method Equili produces high end bottled water. Each of its 500 ml bottled water is sold at $5. Equili has been listed in the stock exchange since 2008, which means that Equili is required to produce financial statements according to the accounting standard. Following are the income statement produced by Equili for 2020 and 2021 as per accounting standard: 2020 ($ 000) 2021 ($ 000) Revenue Cost of Goods Sold Beginning inventory Cost of manufacturing Ending inventory Cost of Goods Sold Gross Margin Marketing Expenses General and Admin Expenses Operating Income 55,000 60,000 3,000 36,000 39,000 (3,000) (6,000) 33.000 36.000 22,000 24,000 13,000 14,000 4.500 4.500 4,500 5,500 In 2020 and 2021, Equili applied standard cost of $2 variable cost and allocate s1 of fixed manufacturing overhead cost per bottled water. Schedule of production shows that Equili produced 12,000,000 and 13,000,000 bottles of water in 2020 and 2021 respectively. Total fixed manufacturing overhead cost are $12,000,000 in 2020. In 2021, due to increasing rental price, fixed manufacturing overhead cost are $13,000,000. The fixed manufacturing overhead cost are allocated based on the number of units produced in the period. The marketing expenses consist of $2,000,000 fixed salary cost and the remaining cost are variable based on the number of bottled waters sold. Required: 1. Prepare operating income statement for 2020 and 2021 using Variable Costing method (10%) 2. Reconcile (mumerically) and explain the difference in the operating income under the two different method
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Working notes 2020 2021 Sales revenue 55000 60000 a Selling price per unit Units sold Variable manuf... View the full answer
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