Question

Check my work Consider the following information for Presidio Inc.'s most recent year of operations. Number of units produced 2,780 Number of units sold Sales price per unit $ 770.ee Direct materials per unit 65.ee Direct labor per unit 95.00 Variable sanufacturing overhead per unit Fixed manufacturing overhead per unit ($322, 110 + 2,700 units) Total variable selling expenses ($10 per unit Sold) Total Fixed general and administrative expenses 88,000.00 16, Required: 2-0. Complete a full absorption costing income statement for Presidio. Assume there was no beginning inventory. 2.b. Complete a variable costing income statement for Presidio. Assume there was no beginning inventory 3. Compute the difference in profit between full absorption costing and variable costing. Complete this question by entering your answers in the tabs below. Reg 2 Reg 28 Reg Complete a full absorption costing income statement for Presidio. Assume there was no beginning inventory Presidio, Inc. Full Absorption Income Statement TI Gross Margin Less Non-Manufacturing Expenses

Answer 1

Ans. 2 a	Presidio, Inc.
	Full Absorption Costing Income Statement
	PARTICULARS		Amount
	Sales   (1,600 * $770)		$1,232,000
	Less: Cost of goods sold (1,600 * $324.30)		-$518,880
	Gross margin		$713,120
	Less: Non manufacturing expenses:
	Fixed general and administrative expense		-$16,000
	Variable selling expense		-$88,000
	Net operating income		$609,120
	*Working Notes:
	In Absorption costing method, the unit product cost is the sum of all manufacturing costs per unit
	whether it is fixed or variable.
	Unit product cost under Absorption Costing:
	Direct materials	$65.00
	Direct labor	$95.00
	Variable Overhead per unit	$45.00
	Fixed overhead per unit   ($714,000 / 42,000)	$119.30
	Product Cost per unit	$324.30
	*Cost of goods sold = Units sold * Product cost per unit under Absorption costing
Ans. 2 b	Presidio, Inc.
	Variable Costing Income Statement
	PARTICULARS		Amount
	Sales   (1,600 * $770)		$1,232,000
	Less: Variable cost of goods sold (1,600 * $205)		-$328,000
	Less: Variable selling expenses		-$16,000
	Contribution Margin		$888,000
	Less: Fixed expenses:
	Fixed manufacturing overhead		-$322,110
	Fixed selling and administrative expenses		-$88,000
	Net operating income		$477,890
	*Cost of goods sold = Units sold * Product cost per unit under Variable costing.
	*Working Notes:
	In variable costing method, the unit product cost is the sum of only variable
	manufacturing costs per unit
	Unit product cost under Variable Costing:
	Direct materials	$65.00
	Direct labor	$95.00
	Variable Overhead per unit	$45.00
	Total production cost per unit	$205.00
Ans. 3	PARTICULARS	Amount
	Full Absorption costing Net income	$609,120
	Less: Variable costing net income	-$477,890
	Difference in Profit	$131,230
	Alternative method :
	Ending inventory units = Units produced - Units sold
	2,700 - 1,600
	1,100 units
	Difference in profit = Ending inventory units * Fixed manufacturing overhead per unit
	1,100 * $119.30
	$131,230