Question

Exercise 19-12 Absorption costing and overproduction LO C1 Jacquie Inc. reports the following annual cost data for its slingle product. Normal production and sales level Sales price 73,eee units 57.30 per unit 10.30 per unit 7.80 per unit 12.30 per unit $1,160,7ee in total Direct materials Direct labor Variable overhead Fixed overhead Complete the below table using absorption costing. (Round cost per unit answers to 2 decimal place.) Production volume Cost of goods sold: 73,000 units 106,000 units Cost of goods sold per unit Number of units sold Total cost of goods sold Jacquie Inc. Income statement through gross margin Sales volume 73,000 units 73,000 units If Jacquie increases its production to 106,000 units, while sales remain at the current 73,000 unit level, by how much would the company's gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production. Number of units sold Change in fixed overhead cost per unit Change in cost of goods sold:

Answer 1

Solution:

Cost of goods sold	Production volume
	73000 units	106000 units
Direct materials	$10.30	$10.30
Direct labor	$7.80	$7.80
Variable overhead	$12.30	$12.30
Fixed overhead	$15.90	$10.95
Cost of goods sold per unit	$46.30	$41.35
Nos of units sold	73000	73000
Total cost of goods sold	$3,379,900.00	$3,018,550.00

Jacquire Inc.
Income Statement - Though Gross margin
	Sales volume
	73000 units	73000 units
Sales	$4,182,900.00	$4,182,900.00
Cost of goods sold	$3,379,900.00	$3,018,550.00
Gross Profit	$803,000.00	$1,164,350.00

Production volume	106000
Nos of units sold	73000
Change in fixed overhead per unit	$4.95
Change in cost of goods sold	$361,350.00