Question

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Problem 6A-5 Super-Variable Costing, Variable Costing, and Absorption Costing Income Statements (LO6-2, LO6-6] Bracey Company manufactures and sells one product. The following information pertains to the company's first year of operations: ts Variable cost per unit Direct materials 32 eBook Fixed costs per year Direct labor $450,500 $ 431,950 $ 74,000 Print Fixed nanufacturing overhead Fixed selling and administrative expenses eferences The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations. Bracey produced 26,500 units and sold 24,300 units. The selling price of the company's product is $72 per unit Required: 1. Assume the company uses super-variable costing: a. Compute the unit product cost for the year. b. Prepare an income statement for the year 2. Assume the company uses a variable costing system that assigns $17.00 of direct labor cost to each unit produced a. Compute the unit product cost for the year. b. Prepare an income statement for the year. 3. Assume the company uses an absorption costing system that assigns $17.00 of direct labor cost and $16.30 of fixed manufacturing overhead cost to each unit produced: a. Compute the unit product cost for the year h Prenare an income statement fnr the uear

Answer 1

1A) Unit product cost under super-variable costing= Direct materials= $32

1B)

Bracey Company
Super-Variable Costing Income Statement
Sales (24300*$72)		$1749600
Variable cost of goods sold (24300*$32)		(777600)
Contribution margin		972000
Fixed expenses:
Direct labor	450500
Fixed manufacturing overhead	431950
Fixed selling and administrative expenses	74000
		(956450)
Net operating income		$15550

2A) Unit product cost under variable costing= Direct materials+Direct labor

= $32+17= $49

2B)

Bracey Company
Variable Costing Income Statement
Sales (24300*$72)		$1749600
Variable cost of goods sold (24300*$49)		(1190700)
Contribution margin		558900
Fixed expenses:
Fixed manufacturing overhead	431950
Fixed selling and administrative expenses	74000
Total fixed expenses		(505950)
Net operating income		$52950

3A) Unit product cost under absorption costing

Direct materials	$32.00
Direct labor	17.00
Fixed manufacturing overhead	16.30
Total unit product cost	$65.30

3B)

Bracey Company
Absorption Costing Income Statement
Sales (24300*$72)	$1749600
Cost of goods sold (24300*$65.30)	(1586790)
Gross profit	162810
Selling and administrative expenses	(74000)
Net operating income	$88810

4A)

Super-variable costing net operating income (loss)	$15550
Add: Direct labor costs deferred in inventory (26500-24300)*$17	37400
Variable costing net operating income (loss)	$52950

Direct labor cost per unit= $450500/26500= $17

4B)

Super-variable costing net operating income (loss)	$15550
Add: Direct labor cost and fixed manufacturing costs deferred in inventory (26500-24300)*$33.30	73260
Absorption costing net operating income (loss)	$88810

Direct labor and fixed manufacturing cost per unit= $17+16.30= $33.30