Question

See Absorption vs Variable Costing Daily Activity Rainbow Concrete Corporation has provided the following data for its two most recent years of operation: Selling price per unit S88 18 Manufacturing costs: Variable manufacturing cost per unit produced: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead per year Selling and administrative expenses: Variable selling and administrative expense per unit sold Fixed selling and administrative expense per year 360,000 74,000 Units in beginning inventory Units produced during the year Units sold during the year Units in ending inventory Year 1 0 15,000 10,000 5,000 Year 2 5.000 12,000 15,000 2,000 Complete (a) through € (a). Assume the company uses absorption costing. Compute the unit product cost in each year. Year 1 Year 2 (b). Assume the company uses absorption costing. Prepare an income statement for each year. Year 1 Year 2
I have to use the information given in the first picture to fill out the chart

Answer 1

Rainbow Concrete Corporation
Absorption Cost Per Unit
	Year 1	Year 2
Direct Material	$                    18.00	$                      18.00
Direct Labor	$                    12.00	$                      12.00
Variable Manufacturing Overhead	$                      6.00	$                        6.00
Total Variable Cost	$                    36.00	$                      36.00
Fixed Manufacturing Overhead In year 1($360000/15000) ,In year 2 ($360000/12000)	$                    24.00	$                      30.00
Total Cost per unit	$                    60.00	$                      66.00
Units in Beginning Inventory	0	5000
Units Produced during the year	15000	12000
Units sold during the year	10000	15000
Closing Inventory	5000	2000
Net income under Absorption costing
Production	15000	12000
Sales	10000	15000
Unit Selling Price(Per unit)=(A)	$                    88.00	$                      88.00
Variable Manufacturing Overhead	$                    36.00	$                      36.00
Fixed Manufacturing Overhead	$                    24.00	$                      30.00
Cost of goods sold(Per unit)=(B)	$                    60.00	$                      66.00
Gross Margin per unit=Sales price per unit-Cost price per unit=(C )=(A)-(B)	$                    28.00	$                      22.00
Total Gross Margin In year 1(10000*$28) in year 2(5000*$28+10000*$22)=(D)	$        2,80,000.00	$          3,60,000.00
Variable Selling Expenses=(E )	$           70,000.00	$          1,05,000.00
Fixed selling & Administrative Expenses=(F)	$           74,000.00	$             74,000.00
Net Operating Income=(D )-(E )-(F)	$        1,36,000.00	$          1,81,000.00
Cost Per Unit under Variable costing
	Year 1	Year 2
Direct Material	$                    18.00	$                      18.00
Direct Labor	$                    12.00	$                      12.00
Variable Manufacturing Overhead	$                      6.00	$                        6.00
Selling & Administrative Expenses	$                      7.00	$                        7.00
Total Variable Cost	$                    43.00	$                      43.00
Net income under variable costing
Production(Units)	15000	12000
sales(Units)	10000	15000
Selling price per unit	$                    88.00	$                      88.00
Variable cost per unit	$                    43.00	$                      43.00
Fixed Production cost	$        3,60,000.00	$          3,60,000.00
Fixed selling & administrative expenses	$           74,000.00	$             74,000.00
Selling Price =(10000*$88) in Year 1,(15000*$88) in year 2=(A)	$        8,80,000.00	$       13,20,000.00
Variable cost(10000*$43) in year 1,(15000*$43) in year 2=(B)	$        4,30,000.00	$          6,45,000.00
Contribution=(C )=(A)-(B)	$        4,50,000.00	$          6,75,000.00
Less: Fixed production cost=(D)	$        3,60,000.00	$          3,60,000.00
Less: Fixed Selling & administrative expenses=(E )	$           74,000.00	$             74,000.00
Net Operative Income=(C )-(D )-(E )	$           16,000.00	$          2,41,000.00
Difference arises in Variable and Absorption Costing Method due to fixed Manufacturing Overhead cost deferred in Inventory
Year	Year 1	Year 2
Variable Costing Net Operating Profit	$           16,000.00	$          2,41,000.00
Add: Fixed Manufacturing Overhead cost deferred in Inventory(5000*$24),(2000*$30)	$        1,20,000.00	$             60,000.00
Less: Fixed Manufacturing Overhead in Beginning Inventory		$          1,20,000.00
Net Operating Income under Absorption costing	$        1,36,000.00	$          1,81,000.00