Question

Question 1 of Monsters and Heroes and Men, Ltd. which produces a single product, has provided the follow data for its first two months of operations. Since August was the first month of operations, the company had no beginning inventory for August: August Number of units produced Number of units sold Units in ending inventory 5,000 4,000 1,000 September 8,000 9,000 $91 PRICE and COST INFORMATION: Selling price: Manufacturing costs: Direct materials $11 per unit Direct labor $27 per unit Variable manufacturing overhead $7 per unit Fixed manufacturing overhead $58,000 total Selling and administrative costs: Variable selling and administrative expenses $4 per unit Fixed selling and administrative expenses $87,500 total a. Compute the unit product cost in August using absorption costing. b. Compute the unit product cost in August using variable costing. c. Calculate net income for the month of August using absorption costing. d. Calculate net income for the month of August using variable costing. e. Calculate net income for the month of September using absorption costing. f. Calculate net income for the month of September using variable costing.

Answer 1

page-1 ' unt product cast in August eying Absorption Casting IN unit cost per produsta NE urect Labour & Direct material tvariable fred costerunit (est ber whit mansoutwring manfart overhead cest wring over. per US tout TNI ter marmorturing overheal Cost per unit - Eted marmpitoring acerhead No of unit potatott INT NTP dove 3000 NE unit cost per prodent = 27+ 11 +7 +11.6 2 566 August using variable Lo unit product cast in nosting per unit unit (ait for product a Diree Labour cost t Direct material t variable Cost her unit manufacturing overhead cost per unit = 27 + 11 + 7 unit cost per product) $45

page-2 month of August Computation of income for the ugog absorption costing raparticulares variable mahuscaturing cost Dm C 5000'>) DLC 5000 727) Variable mandatewing C5000173 5500D 135000 3500 arrhead cost e Exed manufacturing cost absorbe 1 077 Total cost of production ct opening Stock (- Closing stock - 28300007 L 5000 22500v 58 Juu 283000 56600 22 6400 t selling & administrative Etherses Variable cor (4000x w 16000 87500 Totes Lost Profit (blf) Sales (4000+91) 10 3500 32.9900 3-107 364 000

Page 3 d) completation of Net greame for the month of August U ljerg Vatable cost art colors Sales (40000 xa1 CAJ 364.000 Sirasable cost (B) meiney askining 5 chox 45 [wwwhd 225000 in Parts 91. gpening shoela Les closing (1000x45 (45010) (180000) Stock 784000 selling & distribution 16000 PODOO n contributor (9-13 164ooo les fited cost 145500 - 550 000 78 7500) v progit 18500 04 i

page-4 e completation of net neome far emot September ging assorbtion casting Particulars Variable marcatering con DM Croot 88000 DL (8000x27) 2160oo variable manufacturing cost 540 (8000x75 360000 Stifted manufacturing cost [ 52000 Total cost of production 41 oso 57600 raculates in part o) closing stock 4746 JD t selling & distribution variable (9000+4) 36000 8750D A oberity State Total cost Propit (blf) saly 19000 xay 598100 220900 819000

319 320 (1) sales (900x 9) CA page-5 & Computation of net gnome for the month of Septembar using variable cost Partculary Cij voorable cost (B) manufacturine (8000 +45 3 boods #opering tak CCaterdated in Parta) 4500D (-10osing Stock 405000 Selling & distribution (900044) 36000 (1) contribution (AB) 37-200D i rited cost (56000 +87500) 143300 progit 232300

page-6 2 ΔΛ.ΑΛΛΑ vote & gtis noted that selling and administrative 18 costs (both fited and variable cast are periodic last es nahore and as such are ethersed in the period in which it occured loueuen these Cast are not included in the calitation of prodent Notes: Closing stock of Sebermoto August-ly opering of AAANNSS