Prepare a 2014 income statement through gross profit for Giovanni Company, using the variance data

Prepare a 2014 income statement through gross profit for Giovanni Company, using the variance data in Practice Exercises 23-1A, 23-2A, 23-3A, and 23-4A. Assume Giovanni sold 3,500 units at $400 per unit.

Answer:

GIOVANNI COMPANY 

Income Statement Through Gross Profit 

For the Year Ended December 31, 2014 

Sales (3,500 units × $400) $1,400,000 

Cost of goods sold—at standard* 1,093,750 

Gross profit—at standard $   306,250 

    F

avorable Unfavorable  

Less variances from standard cost:    

Direct materials price (PE23–1A) $10,800   

Direct materials quantity (PE23–1A)  $13,600  

Direct labor rate (PE23–2A)  8,850  

Direct labor time (PE23–2A)  6,000  

Factory overhead controllable (PE23–3A)  2,150  

Factory overhead volume (PE23–4A) 900  (18,900) 

Gross profit   $   287,350 

    

* Direct materials (3,500 units × 4 gal. × $34.00)…………………………………………………… 

$  476,000 

Direct labor (3,500 units × 5 hrs. × $30.00)……………………………………………………… 525,000 

Factory overhead [3,500 units × 5 hrs. × ($3.50 + $1.80)]………………………………………   92,750 

Cost of goods sold at standard……………………………………………………………………… $1,093,750