Question

16 IV Variable costing income statement: (20 points) XYZ manufactured 30,000 units of product Costs were as follows: Direct Materials - S120,000 A Direct Labor - $240,000 Variable Overhead - $120,000 2 - ) Fixed Overhead $360,000. -12-24 Additionally the company had $300,000 of SGA of which 50% was fixed and 50% was variable. 150 0.00 The company sold 25.000 units for $52 cach. Ignore taxes. a. Prepare an absorption costing (traditional) income statement and compute ending inventory. (10 points) Sales 73 SUDUG s12-25iven legs 3 700.00 So -2 i 6.P 6ooooo Sout26-140.000 2 sov L =12- OH SGA 3oonous x 28 700000 252 1300000 b. Show a contribution margin (CVP) income statement and compute ending inventory.(10 points) (hint: What do you do with fixed cost?) E o with fixed cost?) Eng Suce 3.veo - 25.ws 16 Joooo Sales - 13000oo rerieste probtin- 4000co Varmblo S.GA 150,000 C.M. - 750,000 Fixed pretro - 360.000 Fixus.CA. 150.000 Net 240.000

Managerial accounting.

Not sure if this is right. Can someone work it out?

Answer 1

Answer to Requirement A:

Cost of goods manufactured = Direct materials + Direct labor + Variable overhead + Fixed overhead
Cost of goods manufactured = $120,000 + $240,000 + $120,000 + $360,000
Cost of goods manufactured = $840,000

Cost per unit = Cost of goods manufactured / Units produced
Cost per unit = $840,000 / 30,000
Cost per unit = $28.00

Absorption Costing Income Statement Sales 1300000 Less: Cost of Goods Sold 700000 Gross Profit 600000 Less: Selling and Administrative Expense 300000 Net Operating Income 300000

Sales = Units sold * Selling price per unit
Sales = 25,000 * $52.00
Sales = $1,300,000

Cost of goods sold = Units sold * Cost per unit
Cost of goods sold = 25,000 * $28.00
Cost of goods sold = $700,000

Ending inventory = Units in ending inventory * Cost per unit
Ending inventory = 5,000 * $28.00
Ending inventory = $140,000

Answer to Requirement B:

Variable cost of goods manufactured = Direct materials + Direct labor + Variable overhead
Variable cost of goods manufactured = $120,000 + $240,000 + $120,000
Variable cost of goods manufactured = $480,000

Variable cost per unit = Variable cost of goods manufactured / Units produced
Variable cost per unit = $480,000 / 30,000
Variable cost per unit = $16.00

Contribution Margin Income Statement Sales 1300000 Less: Variable Expenses Variable Cost of Goods Sold 400000 Variable Selling and Administrative 150000 Total Variable Expenses 550000 Contribution Margin 750000 Less: Fixed Expenses Fixed Manufacturing Overhead 360000 Fixed Selling and Administrative 150000 Total Fixed Expenses 510000 Net Operating Income 240000

Sales = Units sold * Selling price per unit
Sales = 25,000 * $52.00
Sales = $1,300,000

Variable cost of goods sold = Units sold * Variable cost per unit
Variable cost of goods sold = 25,000 * $16.00
Variable cost of goods sold = $400,000

Ending inventory = Units in ending inventory * Variable cost per unit
Ending inventory = 5,000 * $16.00
Ending inventory = $80,000