Question

Consider the following information for Presidio Inc.'s most recent year of operations.

Number of units produced		2,900
Number of units sold		1,700
Sales price per unit	$	790.00
Direct materials per unit		75.00
Direct labor per unit		105.00
Variable manufacturing overhead per unit		55.00
Fixed manufacturing overhead per unit ($346,550 ÷ 2,900 units)		119.50
Total variable selling expenses ($12 per unit sold)		20,400.00
Total fixed general and administrative expenses		90,000.00

Required:
2-a. Complete a full absorption costing income statement for Presidio. Assume there was no beginning inventory.
2-b. Complete a variable costing income statement for Presidio. Assume there was no beginning inventory.
3. Compute the difference in profit between full absorption costing and variable costing.

Reg 2A Reg 28 Reg 3 Complete a full absorption costing income statement for Presidio. Assume there was no beginning inventory. Presidio, Inc. Full Absorption Income Statement Gross Margin Less: Non-Manufacturing Expenses Net Operating Income Req2A Req 2B > Reg 2A Reg 28 Req3 Complete a variable costing income statement for Presidio. Assume there was no beginning inventory. Presidio, Inc. Variable Costing Income Statement Contribution Margin Less: Fixed Costs Net Operating Income < Req 2A Req3 > Reg 2A Reg za Reg 28 Reg ze Reg 3 Reqs Compute the difference in profit between full absorption costing and variable costing. Difference in Profit Req 2B Req3 >

Answer 1

Calculation of Closing Stock Particulars Units A.Beginning Inventory B.Production 2,900.00 C.Sales 1,700.00 Closing A +B-C 1.200.00

Calculation of unit Product Cost Particulars Calculation Absorption Costing Variable Costing Direct Material per unit Direct Labour per unit Variable manufacturing overhead per unit Fixed manufacturing overhead per unit Manf. Costs/Units produced - $346,550 / 2900 Unit Product Cost 75.00 S 105.00 S 55.00 S 119.50 354.50 S 75.00 105.00 55.00 $ S S S 235.00 Cost of goods Sold Calculation Calculation Particulars Absorption Costing Variable Costing | A.Opening Stock Previous Closing B.Cost of goods manufactured No. of production x Unit product cost 2.900 x 5354.5 2,900 x $235 S 10,28,050.00 S 6,81,500.00 C.Closing Inventory No. of units x Unit product cost 1,200 x 53545 1.200 x $235 S 4 ,25,400.00 S 2,82,000.00 Cost of Goods Sold A+B-C S 6,02,650.00 $ 3,99,500.00

13,43,000.00 Presidio Inc. Absorption Costing Income Statement Sales 1,700 x $790 Cost of goods sold: Cost of goods manufactured S 10,28,050.00 Ending inventory $ 4,25,400.00 Total cost of goods sold Gross margin Less: Non manufacturing costs Selling and administrative 1,700 x $12 expenses Fixed General and administartive expense Net Operating income 6,02,650.00 7,40,350.00 20,400.00 90,000.00 6,29,950.00

13,43,000.00 Presidio Inc. Variable Costing Income Statement Sales 1,700 x $790 Variable cost of goods sold: Variable cost of goods $ 6,81,500.00 manufactured Ending inventory -2,82,000.00 Total variable cost of goods sold Manufacturing margin Variable selling and administrative 1.700 x $12 expenses Contribution margin Fixed costs: Fixed manufacturing costs $ 3,46,550.00 Fixed selling and administrative 90,000.00 expenses Total fixed costs Net Operating income 3,99,500.00 9,43,500.00 20,400.00 9,23,100.00 4,36,550.00 4,86,550.00

Reconciliation Schedule Particulars Calculation Net Operating Income under Variable costing Add: Fixed Manufacturing overhead deferred in inventory Closing units x fixed manf. Oh per unit Amount $ 4,86,550.00 $ 1,43,400.00 | Net Operating Income under Absorption costing Difference in profit $ S 6,29,950.00 1,43,400.00