Question

Dodner Company uses an absorption costing system in accounting for the single product it manufactures. The following selected data are for the year 2020: Sales (20,000 $720,000 units) Direct materials $259,200 used Direct labor $86,400 costs Variable manufacturing $25,920 overhead Fixed manufacturing $34,560 overhead

Answer 1

Answer for A Variable Costing Income Statement Amount Amount $ 720,000 Sale Value Variable Costs : Direct Material $216,000 ( Sold units x Direct Material cost per unit i.e. $ 10.80 ) (20,000 x $ 10.80) Direct Labor C $ 72,000 (Sold units x Direct Labor cost per unit i.e. $ 3.60 ) (20,000 x $ 3.60) Variable Manufacturing Overhead $ 21,600 (Sold units x Variable Mfg Overhead cost per unit i.e. $ 1.08) (20,000 x $ 1.08 ) Total Variable Cost (B+C+D) $ 309,600 Gross Contribution Margin (ALE) $ 410,400 $ 43,200 Variable Selling & Administrative expenses G (Sold units x Variable Selling & Administrative expenses per unit i.e., $ 2.16) = ( 20,000 units x $ 2.16) Contribution Margin (F-G) $ 367,200 Fixed Costs : Fixed Manufacturing Overhead Fixed Selling & Administrative expenses $ 34,560 $ 144,000 Total Fixed Cost (I +J) $ 178,560 Net Income as per Variable costing (H-K) $ 188,640

Answer for B Absorption Costing Income Statement Amount Amount $ 720,000 Sale Value Cost of Goods Manufactured: Direct Material B $259,200 (Produced units x Direct Material cost per unit i.e. $ 10.80) (24,000 x $ 10.80 ) Direct Labor C $ 86,400 (Produced units x Direct Labor cost per unit i.e. $ 3.60) (24,000 x $ 3.60) Variable Manufacturing Overhead $ 25,920 (Produced units x Variable Mfg Overhead cost per unit i.e. $ 1.08 ) (24,000 x $ 1.08 ) Fixed Manufacturing Overhead E $ 34,560 given Cost of Goods Avaialble for Sale ( B+C+D+E) F $ 406,080 Cost of Closing Inventory: Direct Material G $ 43,200 (Unsold Units X Direct Material cost per unit i.e. $ 10.80) (4,000 x $ 10.80 ) Direct Labor H $ 14,400 (Unsold Units X Direct Labor cost per unit i.e. $ 3.60) (4,000 x $ 3.60) Variable Manufacturing Overhead $ 4,320 (Unsold units x Variable Mfg Overhead cost per unit i.e. $ 1.08 ) (4,000 x $ 1.08 ) Fixed Manufacturing Overhead J $ 5,760 (Unsold units x [ Fixed Mfg Overhead cost / No. of units produced ]) (4,000 x [ $ 34,560 / 24,000 units]) Cost of Closing Inventory (G+H+ I +J) K $ 67,680 es produced 5,760 Cost of Goods Sold (F-K) $ 338,400 Gross Profit (A-L) $ 381,600 Selling and Administrative expenses : Variable Selling & Administrative expenses 0 $ 43,200 (Sales units x Variable Selling & Administrative expenses per unit i.e., $ 2.16) = ( 20,000 units x $ 2.16) Fixed Selling & Administrative expenses P $144,000 Total Selling & Administrative expenses (O+P) Q $ 187,200 Net Income as per Absorption costing (M-Q) R $ 194,400

Working Notes Calculation of Variable costs per unit Amount 10.80 3.60 Direct Material (Direct material used / No. of units produced ) Direct Labor (Direct labor used / No. of units produced) Variable Manufacturing overhead (VMOH / No. of units produced) Variable Selling and Administrative expenses ( VSAE/ No. of units sold ) 1.08 2.16