Question

Enter numbers in blue cells 2 Enter formulas in the yellow cells 3. Enter your narrative analysis in the green cells Kitty Hawk manufactures and distributes high end drones. The following costs are available for the year end. The company had no beginning inventory. Last year they produced 1,800 units and but only sold 1,600 units. The unit selling price was $4,300 and expenses were: 1,800 Variable Cost per Unit Direct Materials Direct Labor Variable Mfg Over Head Variable selling and Units Produced 900 Units Sold 750 Units Remaining 350 Unit selling price 1,600 200 4,300 admir 950,000 14 Annual Fixed Costs | 15 Mfg overhead fixed Fixed Selling and admin 16 Expenses 87,500 1.Compute the cost of manufacturing one unit for both variable and 20 absorption costing

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Answer 1

1,800 1,600 Variable Cost Per Unit Direct Material Direct Labor Variable Mfg Over Head Variable Selling & Admin Units Produced 900 Units Sold 750 Units Remaining 350 Unit Selling Price 200 4,300 Annual Fixed Cost Mfg Overhead fixed Fixed Selling & Admin Exp 9,50,000 87,500 1. Comput the cost of manufacturing one unit for both variable and absorption costing Fixed Overhed Units Produced 10,37,500 576.39 fixed cost per unit 1800 (=B23/B24) Determine the product cost Variable Absorption for each method Direct Materials 900.00 900.00 Direct Labor 750.00 750.00 Variable Mfg Over Head 350.00 350.00 Variable Selling & Admin 65.00 65.00 Fixed Cost per unit 576.39 (=C23) Total Cost per unit 2,065.00 2,641.39 (=SUM(B27:B31)) (=SUM(C27:031)) 2. Prepare an Income Statement for both variable and absorption costing Variable 1,600.00 4,300.00 $ 68,80,000.00 (=B40*B39) 2,000.00 $ 32,00,000.00 (=B41*B39) $ 36,80,000.00 Variable Costing Income Stmt Per Unit Units Sold $ Sales $ Variable Prod Cost $ VCOGS Less: Variable Selling Expenses $ MFG Margin Less Fixed Cost Fixed Mfg Overhead Fixed Selling Total Fixed Cost 65.00 $ $ 1,04,000.00 35,76,000.00 (=C42-C43) $ $ $ 9,50,000.00 87,500.00 10,37,500.00 (=SUM(C46:C47)) Net Income $ 25,38,500.00 (=C44-C48)

Per Unit $ $ $ Absorption Costing Units Sales COGS Gross Profit Less: Period Cost Variable Selling Fixed Selling Total Period Cost Variable 1,600.00 4,300.00 $ 68,80,000.00 (=B60*859) 2,527.78 $ 40,44,444.44 (=B61*B59) $ 28,35,555.56 $ 65.00 $ $ $ 1,04,000.00 (=B64*B59) 77,777.78 1,81,777.78 Net Income $ 26,53,777.78 (=C62-C66) Proof Absorption Net Income Variable Net Income Difference $ $ 26,53,777.78 25,38,500.00 $ 1,15,277.78 (=B73-B74) Absorption Ending Inventory Per Unit Total Ending Inventory $ $ 200.00 2576 20 $ 5,15,277.78 (=B78*B79) Variable Ending Inventory Per Unit Total Ending Inventory $ $ 200.00 2,000.00 $ 4,00,000.00 (=B84*B83) Difference 1,15,277.78 (=C80-C85)

Points to be noted:

1. The formulas entered in yellow cells is written in RED ink in the adjoining cells in brackets.
2. Be careful while reading numbers (with commas).
3. The cell references used are according to your question. So you can apply the formulas as it is.

1,800 1,600 Variable Cost Per Unit Direct Material Direct Labor Variable Mfg Over Head Variable Selling & Admin Units Produced 900 Units Sold 750 Units Remaining 350 Unit Selling Price 200 4,300 Annual Fixed Cost Mfg Overhead fixed Fixed Selling & Admin Exp 9,50,000 87,500 1. Comput the cost of manufacturing one unit for both variable and absorption costing Fixed Overhed Units Produced 10,37,500 576.39 fixed cost per unit 1800 (=B23/B24) Determine the product cost Variable Absorption for each method Direct Materials 900.00 900.00 Direct Labor 750.00 750.00 Variable Mfg Over Head 350.00 350.00 Variable Selling & Admin 65.00 65.00 Fixed Cost per unit 576.39 (=C23) Total Cost per unit 2,065.00 2,641.39 (=SUM(B27:B31)) (=SUM(C27:031)) 2. Prepare an Income Statement for both variable and absorption costing Variable 1,600.00 4,300.00 $ 68,80,000.00 (=B40*B39) 2,000.00 $ 32,00,000.00 (=B41*B39) $ 36,80,000.00 Variable Costing Income Stmt Per Unit Units Sold $ Sales $ Variable Prod Cost $ VCOGS Less: Variable Selling Expenses $ MFG Margin Less Fixed Cost Fixed Mfg Overhead Fixed Selling Total Fixed Cost 65.00 $ $ 1,04,000.00 35,76,000.00 (=C42-C43) $ $ $ 9,50,000.00 87,500.00 10,37,500.00 (=SUM(C46:C47)) Net Income $ 25,38,500.00 (=C44-C48)

Per Unit $ $ $ Absorption Costing Units Sales COGS Gross Profit Less: Period Cost Variable Selling Fixed Selling Total Period Cost Variable 1,600.00 4,300.00 $ 68,80,000.00 (=B60*859) 2,527.78 $ 40,44,444.44 (=B61*B59) $ 28,35,555.56 $ 65.00 $ $ $ 1,04,000.00 (=B64*B59) 77,777.78 1,81,777.78 Net Income $ 26,53,777.78 (=C62-C66) Proof Absorption Net Income Variable Net Income Difference $ $ 26,53,777.78 25,38,500.00 $ 1,15,277.78 (=B73-B74) Absorption Ending Inventory Per Unit Total Ending Inventory $ $ 200.00 2576 20 $ 5,15,277.78 (=B78*B79) Variable Ending Inventory Per Unit Total Ending Inventory $ $ 200.00 2,000.00 $ 4,00,000.00 (=B84*B83) Difference 1,15,277.78 (=C80-C85)