Question

Variable-Costing and Absorption-Costing Income Borgues Company produces and sells wooden pallets that are used for moving and stacking material. The operating costs for the past year were as follow Variable costs per unit: Direct materials Direct labor Variable overhead Variable selling $0.90 Fixed costs per year: Foed overhead $180,000 Selling and administrative $ 96,000 During the year, Boques produced 200,000 wooden palets and sold 200.300 a $9 each Borgestad 8.200 pes in beginning finished goods inventory costs have not changed from last year to this year. An actual casting system is used for product costing Required: 1. What is the per un inventory cost that is contable for report year? on Borussbalance sheet the end of the How many units are in ending inventory? Check My Work more Check My Workse romani Previous Next > All worked mal instructor Save and Eat Submit Assignment for Grading MacBook Pro IK TL

Answer 1

Variable cost p.u
Direct Materials	$2.85
Direct Labour	$1.92
Variable OH	$1.60
Total Variable Manufacturing cost p.u	$6.37
Variable Selling p.u	$0.90
Fixed Manufacturing Cost Absorption Rate p.u
Fixed Overhead	$1,80,000
No. of Units Produced	200000
Absorption Rate p.u	$0.90
Selling and Administrative	$96,000

1. Per Unit Acceptable Inventory Cost
=Variable Manufacturing cost p.u + Fixed OH Absorption Rate p.u
=$6.37+$0.90
$7.27
Ending Inventory Units
=Opening units + Produced Units-Sold units
=8200+200000-204300
3900
Total Cost of Ending Inventory
=Ending Inventory units*cost p.u
=3900*$7.27
$28,353
2. Absorption Costing Operating Income
Sales	=204300*9		$18,38,700
Cost of Goods sold:
Beginning Inventory	=8200*7.27	$59,614
Production Cost	=200000*7.27	$14,54,000
Cost of Goods available for sale		$15,13,614
-Ending Inventory	=3900*7.27	-$28,353	-$14,85,261
Gross Profit			$3,53,439
Selling and Administrative Expense
Variable	=204300*0.9	$1,83,870
Fixed		$96,000	-$2,79,870
Net Operating Income			$73,569
3. Per Unit Inventory Cost under Variable costing
=Ending Inventory units*Variable Manufacturing cost p.u
=3900*6.37
$24,843
Does this differ from unit cost in Req. 1?
Yes
4. Variable Costing Operating Income
Sales	=204300*9		$18,38,700
Variable Cost of Goods sold:
Beginning Inventory	=8200*6.37	$52,234
Production Cost	=200000*6.37	$12,74,000
Cost of Goods available for sale		$13,26,234
-Ending Inventory	=3900*6.37	-$24,843	-$13,01,391
Gross Contribution Margin			$5,37,309
Variable Selling and Administrative Expense	=204300*0.9		-$1,83,870
Contribution Margin			$3,53,439
Less Fixed Costs:
Fixed Overhead		$1,80,000
Selling and Administrative		$96,000	-$2,76,000
Net Operating Income			$77,439

Ending Inventory Units
=Opening units + Produced Units-Sold units
=8200+200000-196700
11500
5. Absorption Costing Operating Income
Sales	=196700*9		$17,70,300
Cost of Goods sold:
Beginning Inventory	=8200*7.27	$59,614
Production Cost	=200000*7.27	$14,54,000
Cost of Goods available for sale		$15,13,614
-Ending Inventory	=11500*7.27	-$83,605	-$14,30,009
Gross Profit			$3,40,291
Selling and Administrative Expense
Variable	=196700*0.9	$1,77,030
Fixed		$96,000	-$2,73,030
Net Operating Income			$67,261
Variable Costing Operating Income
Sales	=196700*9		$17,70,300
Variable Cost of Goods sold:
Beginning Inventory	=8200*6.37	$52,234
Production Cost	=200000*6.37	$12,74,000
Cost of Goods available for sale		$13,26,234
-Ending Inventory	=11500*6.37	-$73,255	-$12,52,979
Gross Contribution Margin			$5,17,321
Variable Selling and Administrative Expense	=196700*0.9		-$1,77,030
Contribution Margin			$3,40,291
Less Fixed Costs:
Fixed Overhead		$1,80,000
Selling and Administrative		$96,000	-$2,76,000
Net Operating Income			$64,291