Question

Data Table January 2018 0 Units produced and sold: Sales 800 meals Production Variable manufacturing cost per meal Sales commission cost per meal Total fixed manufacturing overhead Total fixed selling and administrative costs 1,000 meals 5 650 400 Print Done

Answer 1

Req 1.
Unit cost under Absorption costing:
variable Manufacturing cost peer unit				5
Fixed Manufacturing Cost per unit (650/1000)				0.65
Unit cost under Absorption costing:				5.65
Unit cost as per Variable costing:
Variable manufacturing cost per unit				5
Unit cost as per Variable costing:				5
			Absorption	Variable
Total Product cost per meal			5.65	5
Note: Unit product cost under absorption costing consist of both variable and fixed manufacturing cost per unit
However, the unit product cost under variable costing consist of only variable manufacturing cost
Req 2-a
Income Statement (Absorption costing)
Sales revenue (800 meals @ 12)				9600
Less: Cost of goods sold (800 meals @ 5.65)				4520
Gross profit				5080
Less: Operating expenses				2000
(800 meals @ 2+ 400)
Net Operating income				3080
Req 2-b
Income Statement (Variable costing)
Sales revenue (800 meals @ 12)				9600
Less: Variable cost				5600
Contribution				4000
Less: Total fixed cost				1050
Net Operating income				2950
Note:
Total Variable cost under variable costing:
Cost of goods sold (800*5)				4000
Sales commission (800*2)				1600
Total Variable cost under variable costing:				5600
Total Fixed cost under variable costing:
Fixed Manufacturing cost				650
Fixed Selling and adming cost				400
Total Fixed cost under variable costing:				1050
Req 3.
Operating income is higher under Absorption costing