Question

Waterloo Storage Products makes a four-drawer plastic storage cabinet on casters meant for use in garages and workshops. Each cabinet sells for $35. Data for last year’s operations follow:

Units in beginning inventory		0
Units produced		25,000
Units sold		21,500
Units in ending inventory		3,500
Variable costs per unit:
Direct materials	$	8
Direct labour		10
Variable manufacturing overhead		2
Variable selling and administrative		4
Total variable cost per unit	$	24
Fixed costs:
Fixed manufacturing overhead	$	75,000
Fixed selling and administrative		110,000
Total fixed costs	$	185,000

Assume that the company uses absorption costing.

Required:

1. Compute the unit product cost for one storage cabinet.

2. Prepare an income statement for the year. (Do not leave any empty spaces; input a 0 wherever it is required.)

Answer 1

Date Page ( Calculation unit for of Statement showing - Boduction per buit product cost / cast each cabinet of 200,000 250,000 50,000 500,0000 Total cost of production of inte al vriable Cast & Dinut material (25000 78) Dinc loborr (25000 * 10) barable Mounfacturing overhead (25000X 2) by Tote forced Cast Freed rannfacturing an lead C 78000 Tota Cass- of Roduct for 25000 Vuits (ath) - 575000 Unit Product cast for one storage Cabinet - Cost of production No of units produced 575000 25000 J23

Date Page 2) Statement showing income statement for the year it 4.52500 Total Sales (21560 X $35) les: variable cost : Direct Material (21 500 x 8) Direct labout (21500 x 10) Varrible Manufacturing Overhead (21500 X 2) / Wiable selling Adwustrative overhed 172.000 215000 43000 (21.500 X 4) 86000 les fined cast of fred Manufacturing anrheed Freed selling 4 Adentrative rooo 110000 | Net incaue (Net Profit 1 $51000 din