Question

Lyons Company manufactures and sells one product. The following information pertains to the company’s first year of operations: Variable cost per unit: Direct materials $ 20.00 Fixed costs per year: Direct labor $ 1,400,000 Fixed manufacturing overhead $ 520,000 Fixed selling and administrative expenses $ 160,000 The company does not incur any variable manufacturing overhead costs or variable selling and administrative expenses. During its first year of operations, Lyons produced 80,000 units and sold 70,000 units. The selling price of the company’s product is $52 per unit. Required: 1. Assume the company uses super-variable costing: a. Compute the unit product cost for the year. b. Prepare an income statement for the year. 2. Assume the company uses a variable costing system that assigns $17.50 of direct labor cost to each unit produced: a. Compute the unit product cost for the year. b. Prepare an income statement for the year.

3. Reconcile the difference between the super-variable costing and variable costing net operating incomes.

Super-variable costing net operating income (loss)
Variable costing net operating income (loss)

Answer 1

37.50 1 a) variable costing direct material per unit 20.00 direct labor 17.50 variable mfg 0.00 unit product cost /manufacturing cost per unit 1 b) LYONS ccompany income statement for the year ended xxxx variable costing sales variable cost of goods sold 2625000 variable selling 3640000 2625000 1015000 contribution margin fixed mfg fixed selling 5,20,000 1,60,000 6,80,000 3,35,000 net operating profit

36,40,000 1400000 22,40,000 14,00,000 0 2 a) LYONS ccompany income statement super variable costing sales throughput cost of goods sold 70000*$20 throughput contribution margin direct labor variable mfg variable selling contribution margin fixed costs net operating income 2 b) super variable costing direct materials unit product cost/manufacturing cost per unit 3 reconciliation schedule super variable costing net operating income ADD ; direct labor cost difered in inventory =$17.5 10000 variable costing net operating income 8,40,000 6,80,000 1,60,000 1,60,000 1,75,000 3,35,000