Question

Complete Absorption Costing vs. Variable Costing Income statements for Randeris Company, Year 1 & Year 2.

RANDERIS COMPANY - YEAR ONE 30,000 25,000 30 $ $ 10 Number of units produced Number of units sold Unit sales price Variable costs per unit: Direct materials, direct labor variable mfg. overhead Selling & administrative expenses Fixed costs per year: Manufacturing overhead Selling & administrative expenses $ 3 $ 150,000 $100,000 RANDERIS COMPANY - YEAR TWO 20,000 25,000 5,000 30 $ Number of units produced Number of units sold Units in beginning inventory Unit sales price Variable costs per unit: Direct materials, direct labor variable mfg. overhead Selling & administrative expenses Fixed costs per year: Manufacturing overhead Selling & administrative expenses $ 10 $ 3 $ 150,000 $ 100,000

Answer 1

in Costing - Costing Costing Unit product cost under Absorbtion costing and Direct costing - Absorbtion Absorbtion Particulars Year 1 Year 2 Direct materials, direct labor and variable manufacturing 10.00 10.00 overhead Fixed manufacturing overhead (150000/30000), (150000/20000) 5.00 7.50 10.00 Unit product cost 15.00 17.50 10.00 Year 2 750,000 75,000 350,000 425,000 Determination of Net Income under Absorbtion costing system: Cost of goods sold Year 1 Sales 30 per unit sold 750,000 Less: Cost of goods sold Beginning inventory Add: Cost of goods manufactured 450,000 Goods available for sales 450,000 Less: Ending inventory 75,000 Cost of goods sold 375,000 Gross margin 375,000 Less: Selling and Admin expenses Variable Selling and Administrative overhead 75,000 Fixed Selling and Administrative overhead 100,000 Total Fixed expenses 175,000 Net Operating Income 200,000 425,000 325,000 75,000 100,000 175,000 150,000

Determination of Net Income under Variable costing system: Particulars Sales @ 30 per unit Less : - Variable cost of goods sold Year 1 750,000 Year 2 750,000 50,000 200,000 300,000 50,000 250,000 75,000 250,000 75,000 Beginning inventory Add: Variable cost of goods sold Less: Ending inventory Variable cost of goods sold Variable selling and administrative expense Contribution Margin Less :- Fixed expenses Fixed manufacturing overhead Fixed Selling and Administrative overhead Total Fixed expenses Net Operating Income 425,000 425,000 150,000 150,000 100,000 100,000 250,000 250,000 175,000 175,000