Question

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Problem A Winter Blast manufactures heated scrapers that remove ice from car windows in 30 seconds. They are very popular items ihe Midwest and on the East Coast! They sell for $75.00 each. Selected information for November: Units in beginning inventory Units produced Units sold Units in ending inventory Direct materials $ 22.00 Per unit Direct labor 6.80 Per unit 34,220 Variable factory overhead 1.75 Per unit 2,420 Variable selling and admin 3.00 Per unit 3,540 33,100 Fixed factory overhead 165,500 Per month Fixed selling and admin 265,000 Per month What is the unit product cost for November? 1 Under full absorption costing 2 Under variable costing What is the unit product cost under absorption for October assuming total fixed costs and unit variable costs were the same as November? (41,375 units were produced in October) 3 Under full absorption costing 4Under variable costing 5 What is the gross profit in November (full absorption)? 6 What is the contribution margin in November (variable)? 7 8 What is net operating income for November? Under full absorption costing Under variable costing 9 How much fixed manufacturing overhead was deferred in ending inventory in November under full absorption? How much fixed manufacturing overhead was released from beginning inventory in November under full absorption? 10

Answer 1

Answer 1 & 2
Calculation of unit product cost for November
	Absorption costing	Variable costing
Direct Materials	$22.00	$22.00
Direct Labor	$6.80	$6.80
Variable Factory Overhead	$1.75	$1.75
Fixed Factory Overhead	$5.00
Unit product Cost	$35.55	$30.55
Fixed Factory Overhead cost per unit for November = Total Fixed Factory Overheads / No.of units produced
Fixed Factory Overhead cost per unit for November = $165500/33100 units = $5 per unit
Answer 3 & 4
Calculation of unit product cost for October
	Absorption costing	Variable costing
Direct Materials	$22.00	$22.00
Direct Labor	$6.80	$6.80
Variable Factory Overhead	$1.75	$1.75
Fixed Factory Overhead	$4.00
Unit product Cost	$34.55	$30.55
Fixed Factory Overhead cost per unit for October = $165500/41375 units = $4 per unit
Answer 5
Gross profit in November (Full Absorption)
Sales [34220 units * $75 each]		$2,566,500.00
Less : Cost of goods sold [34220 units *$35.55]		$1,216,521.00
Gross profit in November (Full Absorption)		$1,349,979.00
Answer 6
Contribution Margin in November (Variable)
Sales [34220 units * $75 each]		$2,566,500.00
Less : Variable costs
- Cost of goods sold [34220 units * $30.55]		$1,045,421.00
- Selling and admin [34220 units * $3]		$102,660.00
Contribution Margin in November (Variable)		$1,418,419.00
Answer 7 & 8
Net Operating Income in November (Full Absorption)
Gross Profit	$1,349,979.00
Less : Selling and admin exp.
- Variable [34220 units * $3]	$102,660.00
- Fixed	$265,000.00
Net Operating Income	$982,319.00
Net Operating Income in November (Variable)
Contribution Margin	$1,418,419.00
Less :Fixed Expenses
- manufacturing Overheads	$165,500.00
- Selling and admin exp.	$265,000.00
Net Operating Income	$987,919.00