Question

Cost of Goods Manufactured, using Variable Costing and Absorption Costing On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 5,500 units and sold 4,700 units. The following income statement was prepared, based on the variable costing concept: Frankenreiter Inc. Variable Costing Income Statement For the Year Ended December 31, 20Y1 Sales $1,034,000 Variable cost of goods sold: Variable cost of goods manufactured $583,000 EInventory, December 31 (84,800) Total variable cost of goods sold 498,200 Manufacturing margin $535,800 Total variable selling and administrative expenses 122,200 Contribution margin $413,600 Fixed costs: Fixed manufacturing costs $264,000 Fixed selling and administrative expenses 84,600 Total fixed costs 348,600 Income from operations $65,000 Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept. Variable costing $ Absorption costing $

Answer 1

(a) Variable Costing Unit Cost of Goods Manufactured (6) Absorption Costing Unit Cost of Goods Manufactured S S 106 154 Working Notes: a. Variable Costing Unit Cost of Goods Manufactured = Variable cost of Goods Manufactured/No of Units sold = $498,200/4,700 = $106 6. Absorption Costing Unit Cost of Goods Manufactured = $106 + $264,000/5,500 = $106+S48 = $154