Income Statement for Bright Light – 2020 Calendar Year End

To prepare the income statement for Bright Light for the 2020 calendar year end, we will include the variances provided and calculate the totals. The income statement will include the following sections: sales, cost of goods sold, selling expenses, administrative expenses, and net income.

Income Statement for Bright Light – 2020 Calendar Year End

Sales:
Number of units sold: 6,700
Selling price per unit: $75
Total Sales Revenue: 6,700 units x $75 = $502,500

Cost of Goods Sold:
Direct materials (standard cost): 6,700 units x $10 = $67,000
Direct materials price variance: $(1,900)
Direct materials quantity variance: $2,750
Total Direct Materials Cost: $67,000 + $(1,900) + $2,750 = $67,850

Direct labor (standard cost): 6,700 units x $9 = $60,300
Direct labor time variance: -$225
Total Direct Labor Cost: $60,300 – $225 = $60,075

Fixed factory overhead (standard cost): 6,700 units x $6.50 = $43,550
Variable factory overhead (standard cost): 6,700 units x $4.50 = $30,150
Factory overhead controllable variance: $6,700
Factory overhead volume variance: $(2,100)
Total Factory Overhead Cost: $43,550 + $30,150 + $6,700 + $(2,100) = $78,300

Total Cost of Goods Sold: $67,850 + $60,075 + $78,300 = $206,225

Gross Profit: Total Sales Revenue – Cost of Goods Sold = $502,500 – $206,225 = $296,275

Selling Expenses: $23,500

Administrative Expenses: $27,900

Net Income: Gross Profit – Selling Expenses – Administrative Expenses = $296,275 – $23,500 – $27,900 = $244,875

Conclusion

Based on the calculations above, Bright Light reported a net income of $244,875 for the 2020 calendar year end. The income statement reflects the variances in direct materials and direct labor costs, as well as selling and administrative expenses. It provides a comprehensive view of the company’s financial performance during the year.