Question

The following cost and revenue data relate to a company's first month of operations. 50,000 45,000 83 $ Beginning inventory Units produced Units sold Selling price per unit Selling and administrative expenses: Variable per unit Fixed (per month) Manufacturing costs: Direct materials cost per unit Direct labor cost per unit Variable manufacturing overhead cost per unit Fixed manufacturing overhead cost (per month) 562,000 non sa 16 $ 950,000 Required: 1. Assume that the company uses absorption costing. a. Determine the unit product cost. b. Prepare an income statement for the first month. 2. Assume that the company uses variable costing. a. Determine the unit product cost. b. Prepare a contribution format income statement for the first month.

Answer 1

Requirement: 1a Calculation of Unit cost Under Absorption Costing Direct Material Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Over head Unit Cost 16.00 9.00 1.00 19.00 45.00 Requirement: 1b Absorption costing Income Statement Sales Cost of Goods Sold Gross Margin Selling and Administrative Overheads Net Operating Income or loss 3735000 2025000 1710000 742000 968000

16.00 Requirement: 2a Calculation of Unit cost Under Variable Costing Direct Material Direct Labor Variable Manufacturing Overhead Unit Cost 9.00 1.00 26.00 3735000 Requirement: 2b Variable Costing Income statement Sales (@$83Per unit) Variable Expense: Variable cost of goods sold (@26) Variable Selling and Administrative Expense (@4) 1170000 180000 1350000 2385000 Total Varible Expenses Contribution Magin Fixed Expenses : Fixed manufacturing Overheads Fixed Selling and Administrative Expenses Total fixed Expenses Net Operating Income or loss 950000 562000 1512000 873000