Question

Bracey Company manufactures and sells one product. The following information pertains to the company's first year of operations: Variable cost per unit: Direct materials Fixed costs per year: Direct labor Fixed manufacturing overhead Fixed selling and administrative expenses $ 241,500 $ 319,200 $ 52,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Bracey produced 21,000 units and sold 19,900 units. The selling price of the company's product is $52 per unit. Required: 1. Assume the company uses super-variable costing: a. Compute the unit product cost for the year. b. Prepare an income statement for the year. 2. Assume the company uses a variable costing system that assigns $11.50 of direct labor cost to each unit produced: 3. Compute the unit product cost for the year. b. Prepare an income statement for the year. 3. Assume the company uses an absorption costing system that assigns $11.50 of direct labor cost and $15.20 of fixed manufacturing overhead cost to each unit produced: a. Compute the unit product cost for the year. b. Prepare an income statement for the year.

Answer 1

Req.1
Income statement - super variable costing:
Units Produced		21000
Units sold		19900
	Per Unit	Amount $
Sales	52	1034800
Less: Variable costs:
Direct materials/Unit Cost	21	417900
Contribution	31	616900
Less:Fixed costs:
Direct labor		241500
Manufacturing Overhead		319200
Selling and Administration exp.		52000
Total fixed costs		612700
Net Operating Income		4200
Req.2
Income statement - variable costing:
Units Produced		21000
Units sold		19900
	Per Unit	Amount $
Sales	52	1034800
Less: Variable costs:
Direct materials	21	417900
Direct labor	11.5	241500
Total variable costs/unit cost	32.5	659400
Contribution	19.5	375400
Less:Fixed costs:
Manufacturing Overhead		319200
Selling and Administration exp.		52000
Total fixed costs		371200
Net Operating Income		4200
Req.3:
Income statement - absorption costing:
Units Produced		21000
Units sold		19900
	Per Unit	Amount $
Sales	52	1034800
Less: manufacturing costs:
Direct materials	21	417900
Direct labor	11.5	241500
Manufacturing Overhead (for 19900 units)	15.2	319200
Less:Manuf. Overhead for closing stock 1100 units		-16720
Total manufacturing costs/unit cost	47.7	961880
Gross Income	4.3	72920
Less:Admin & Selling costs:
Selling and Administration exp.		52000
Net Operating Income		20920
Req 4a)
	Amount $
Super variable costing net operating income (loss)	4200
Less/Add: expenses/ reconciliation amount	0
Variable costing net operating income (loss)	4200
Req 4b)
Super variable costing net operating income (loss)	4200
Add: Adjustment for manuf. Costs for closing stock	16720
Variable costing net operating income (loss)	20920