Question

During the first month of operations ended August 31, Kodiak Fridgeration Company manufactured 80,000 mini refrigerators, of which 72,000 were sold. Operating data for the month are summarized as follows: 1 Sales $10,800,000.00 1 Manufacturing costs: Direct materials Direct labor $6,400,000.00 1,600,000.00 1.280,000.00 320,000.00 Variable manufacturing cost 9,600,000.00 Fixed manufacturing cost Selling and administrative expenses: Variable $1,080,000.00 180,000.00 Fixed 1,260,000.00

Answer 1

WORKING NOTES: 1
	CALCUALTION OF cost of production units by using absorption and variable Costing
	Opening stock	0
	Unit Produced =	80000
	Unit Sold =	72000
	Closing Stock =	8000
	CALCULATION OF PER UNIT COST		Per unit Cost
	Direct Material	$                 64,00,000	$                                80
	Direct Labour	$                 16,00,000	$                                20
	Vairable Manufacturing Overhead	$                 12,80,000	$                                16
	Fixed Manufacturing Overhead	$                    3,20,000	$                                  4
	Cost of Production per unit	$                 96,00,000	$                             120
WORKING NOTES: 2
	Particulars	Absorption Costing	Variable Costing
	Direct Material	$                                80	$                                80
	Direct Labour	$                                20	$                                20
	Vairable Manufacturing Overhead	$                                16	$                                16
	Fixed Manufacturing Overhead	$                                  4	$                                 -
	Cost of Production per unit	$                          120.0	$                       116.00
SOLUTION : 1
	ABOSRPTION COSTING INCOME STATEMENTS	Absorption Costing
	Sales	$              1,08,00,000
	Cost of Goods Sold
	Beginning inventory	$                                 -
	Cost of Goods Manufactured	$                 96,00,000
	Less: Ending Inventory (8,000 X $ 120)	$                    9,60,000
	Cost of Goods Sold	$                 86,40,000
	Gross Profit	$                 21,60,000
	Less : Selling Expenses
	Fixed Selling Expenses	$                 10,80,000
	Variable Selling Expenses(40,000 units * 3)	$                    1,80,000
	Net Income	$                    9,00,000
SOLUTION : 2
	VARIABLE COSTING INCOME STATEMENTS	Variable Costing
	Sales	$              1,08,00,000
	Cost of Goods Sold
	Beginning inventory	$                                 -
	Cost of Goods Manufactured (80,000 units X $ 116)	$                 92,80,000
	Less: Ending Inventory (8,000 Units X $ 116)	$                    9,28,000
	Cost of Goods Sold	$                 83,52,000
	Selling Expenses	$                 10,80,000
	Gross Profit	$                 13,68,000
	Less: Fixed Manufacturing overhead	$                    3,20,000
	Less : Fixed Selling Expenses	$                    1,80,000
	Net Income	$                    8,68,000
SOLUTION : 3
	Difference in profit in both method is due to closing inventory. In absorption costing Fixed manufacturing
	overhead is charged on cost of goods sold but in variable costing this expenses is charged as periodical cost