Question

Pabbatti Corporation, which has only one product, has provided the following data concerning its most recent month of operations: $ 108 770 2,400 2,850 320 Selling price Units in beginning inventory Units produced Units sold Units in ending inventory Variable costs per unit: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs: Fixed manufacturing overhead Fixed selling and administrative $ $ $ $ 23 24 2 11 $57,600 $ 5.700 The company produces the same number of units every month, although the sales in units vary from month to month. The company's variable costs per unit and total fixed costs have been constant from month to month. (Hint: Use the reconciliation method.) Required: a. What is the unit product cost for the month under variable costing? Answer is complete and correct. Cost per unit $ 49 Variable costing

Answer 1

Answer- a)-The variable costing unit product cost for the month is =$49 per unit.

Explanation-Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$23+$24+$2 = $49 per unit

b)-

PABBATTI CORPORATION
Income statement (Using variable costing approach)
Particulars			Amount
			$
Sales (a)	2850 units*$108 per unit		307800
Less:- Variable cost of goods sold (b)
Opening inventory	770 units*$49 per unit	37730
Add:- Variable cost of goods manufactured		117600
Direct materials	2400 units*$23 per unit	55200
Direct labor	2400 units*$24 per unit	57600
Variable manufacturing overhead	2400 units*$2 per unit	4800
Variable cost of goods available for sale		155330
Less:- Closing inventory	320 units*$49 per unit	15680	139650
Gross contribution margin C= a-b			168150
Less:-Variable selling & administrative exp.	2850 units*$11 per unit		31350
Contribution margin			136800
Less:- Fixed costs
Manufacturing overhead			57600
Selling & administrative exp.			5700
Net Income			73500