Cost of Goods Manufactured, using Variable Costing and Absorption Costing
On December 31, the end of the first year of operations, Frankenreiter Inc., manufactured 6,300 units and sold 5,400 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 |
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Sales | $1,620,000 | |||
Variable cost of goods sold: | ||||
Variable cost of goods manufactured | $907,200 | |||
Inventory, December 31 | (129,600) | |||
Total variable cost of goods sold | 777,600 | |||
Manufacturing margin | $842,400 | |||
Total variable selling and administrative expenses | 194,400 | |||
Contribution margin | $648,000 | |||
Fixed costs: | ||||
Fixed manufacturing costs | $415,800 | |||
Fixed selling and administrative expenses | 129,600 | |||
Total fixed costs | 545,400 | |||
Income from operations | $102,600 |
Determine the unit cost of goods manufactured, based on (a) the variable costing concept and (b) the absorption costing concept.
Variable costing | $ |
Absorption costing | $ |
Variable Costing (Units cost ) = Variable cost of Goods Manufactures / Units Produced
907,200/6,300 = $144 (Answer)
Absorption Costing (Units Cost) =(Variable Cost of Goods Manufactures + Fixed MOH) / units Produced
(907200+415800)/6300 = $ 210 (Answer)
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